Trends show the general direction price is taking over a significant period of time. Historical prices are composed of a series of different trends, with some increasing, decreasing, or being stable.
Underlying trends in the price are contaminated with other variations such as periodic and irregular variations, these parasitic variations are major problems when it comes to successfully trade a trend.
Types Of Trends
Trends are classified based on their main direction.
An uptrend is characterized by the price sloping upward, making regular new higher highs and higher lows.
A downtrend is characterized by the price sloping downward, making regular new lower lows and lower highs.
A sideways trend is characterized by the market not moving in a particular direction, the price is not making new higher highs or lower lows, but instead, fluctuates within a specific range.
In a sideways trend, we often say that the market is ranging, consolidating, or less commonly trend stationary.
Trends can have many forms, they can be linear or non-linear and can contain retracements, which are variations that have a direction opposite to the main trend. Retracements are caused by cyclical variations in the price and can affect the performances of a trend trading strategy.
Reversals are defined as changes in the direction of a trend. While a lot of traders confirm the presence and direction of a trend in the price to enter a position, others try to spot reversals, the benefits include potentially higher profits, however, spotting reversals is a complicated task.
Technical analysis supports the idea that the longer it takes for a reversal to occur, the greater will be the price change that follows.
Detecting Trending & Ranging Markets With Lux Algo
Lux Algo Premium can tell you whether the market is trending or ranging from the dashboard. Make sure to enable the dashboard from the indicator settings, then take a look at state at the top left of the dashboard, if it shows "ranging" then it means the market is ranging, if it shows "trending" then it means the market is trending. More information on the link below:»Lux Dashboard