Trend Analysis. The Main Notions.

Trend is a general direction of the price.

There are three types of trends:

• 1. Uptrend (or bullish). Prices rise.
• 2. Downtrend (or bearish). Prices fall.
• 3. Flat or Range.

Though any price movement can not be linear. Any trend consists of the periods when the price moves in the direction of the main trend (Impulsive movement) and periods of retracement (Correction). . The market moves in the wave mode. As the result tops and bottoms form on the price charts.

Support/Resistance Levels

Looking at the charts you can notice that tops and bottoms of the market can be almost on the same inclined (sometimes horizontal) line. Such lines are called support / resistance levels.

Resistance: lines are drawn between the significant top points. The more tops confirm the line the stronger it becomes. That is the market shows that the price level, specified by the resistance line, is very important and the market, having reached its saturation, bounces back from it.

Support: lines are drawn between the significant bottom points.
Once the support level is broken downwards it becomes the resistance level. Once the resistance level is broken upwards it becomes the support level.

Channel Lines

Often prices fluctuate between support / resistance levels. Such a movement is called a Chanel. In case the channel lines diverge this is an expanding channel, if they converge, then it is contracting.