The principle behind most trading systems is to trade in the direction of the trend. This is because trend following systems tend to be more profitable than counter-trend trading. As long as the markets are trending in a particular direction, trend following systems can be very rewarding.
“A market trend is defined as a tendency of financial market(s) to move in a particular direction over time”. That is the definition according to Wikipedia.
Investopedia describes a market trend as “the general direction of a market or of the price of an asset.”
From the above descriptions, there are two main attributes of a trend. It must have a given direction, and it must have moved in that direction for a certain period of time. There are essentially two types of market trends; a bullish trend is when the market prices are steadily going upwards, while a bearish trend represents a steady drop in market prices.
The problem with determining the trend is that there are many time frames to choose from, so what could look like a bullish trend on a 1-hour chart could be part of a bear…