What Is a Trend?
A trend is the overall direction of an asset’s price of a period of time. A general increase in price is known as an uptrend while a general decrease in price is known as a downtrend. Trends can cover any amount of price change over any length of time.
An uptrend is characterized by a series of successive higher highs and higher lows. A downtrend is characterized by a series of successive lower highs and lower lows.
Most assets remain in an overall uptrend or downtrend the majority of the time. However, there are usually counter-trend moves and pauses in trending movement along the way.
This may appear confusing at first, but it is actually fairly easy to understand.
How Trends Work
There are two ways to look at price action trends.
First, you have the “fundamentals.”
This is often referred to as the battle between the bulls and the bears (aka. buyers and sellers). Essentially, as market participants buy an asset the price rises. When they sell it, the price falls. Trends develop due to the balance between the two over time. This is a manifestation of the laws of supply and demand dictated by the real-world narratives surrounding the asset.
This model of buying pressure and selling pressure is most popular among investors but some traders use it as well.
Second, you have the “technicals.”
Many traders favor this conceptualization. It is generally considered more tangible and easier to analyze. This makes decision-making more straightforward. Technical analysis is all about the numbers. Along with the model comes a variety of tools that can be used to calculate probabilities about future price action. From there, you can develop contingencies supported by mathematics.
Both ways of looking at trends are valid, with their own strengths and weaknesses.
Either way, additional context is needed.