Stock Market Trends
                     STOCK MARKET TRENDS
Stock Market Trend
As we discussed an earlier section, stock prices 
can be volatile in the short term. They don’t 
necessarily move in a straight line. 
However, as you zoom out and look at slightly 
long-term price patterns, you will discover a 
better defined market trend.
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Understanding of Trend
In general understanding, a trend is the broad 
upward or downward movement of a stock’s 
price over time. 
Upward movement is called an uptrend, while 
those which move lower over a period of time 
are said to be in a downtrend. 
Investors have a tendency of buying stocks that 
are seemingly in an uptrend and selling the 
ones in a downtrend.
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Trend analysis
Stock prices move in a zig-zag manner. In 
technical analysis, we don’t identify a trend 
simply based on how far up or down a stock 
price has moved over a period of time. 
We concern ourselves with the specifics how 
much the stock rose when it moved up, and 
how little it fell in a downtrend
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TOPS OR PEAKS
The tip is called a peak, even in stock market 
parlance. 
Just like the mountain peak is the highest point, 
the stock price peak or top is the highest price 
the stock touched.
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BOTTOMS OR TROUGHS
Stock charts too have a ‘bottom’ or ‘trough’  
the lowest price the stock fell to.
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UPTRENDS
In an uptrend, both the peaks (tops) and 
troughs (bottoms) of a stock chart keep 
increasing successively. 
So, every day or so, the stock price touches a 
new high and falls lower than it did previously.
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DOWNTRENDS
A downtrend is a pattern, where a stock is 
falling constantly. Not only are successive peaks 
lower, successive troughs are also lower. 
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SIDEWAYS/ HORIZONTAL TRENDS
In a sideways trend, a stock doesn’t move 
notably in either direction during an extended 
period. 
Peaks and troughs continue to be constant and 
there is no significant move to decide whether 
to buy a stock or not.
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WHY SHOULD YOU UNDERSTAND MARKET TRENDS?
Understanding market trends is important 
because it tells you which stocks are expected 
to move up, and how much risk there is along 
the way. 
If you sell before the price hits its peak, you 
may lose out on good profits. Similarly, if you 
buy before the price falls to its lowest point, 
then you may make less profit when you finally 
sell it.
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TRENDLINES 
In order to perform effective technical analysis, 
it is critical for you to understand what is a 
trendline. 
A trendline is a line that connects all the 
troughs or all the peaks in a stock chart with 
each other. 
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