A trend in the financial markets refers to the overall price movement direction over a specific period. Traders always check this direction when they start analyzing a particular market. There are three main types of trends – upward (bullish), downward (bearish), and sideways (horizontal). Once a trader spots the current price direction, they can apply various strategies depending on the direction to buy/sell an asset, or to avoid trading at a particular moment.

An uptrend means higher lows, while a downtrend is defined by lower highs. When it comes to sideways price movements, they have no clear direction, and the lows/highs are pretty much equal. Depending on timeframes, trends can be local (from seconds to days), mid-term (from days to months), and major or long-term (from months).

If you are able to identify the current trend, your chances of profiting become significantly higher. Whether you trade digital options or CFDs, knowing the major and local trends will help you filter signals.

How to Spot Trends

There are many ways for traders to spot market trends. Some of the most popular ones include:

• Trendlines. These lines connect the highest lows for uptrends or the lowest highs for downtrends.
• Moving averages. Using MAs with periods of 50 or 200 will help market participants to identify market trends on various timeframes.
• MACD. This indicator helps find trends. If the MACD is below 0, the downtrend is prevailing, while when the readings are about 0, the uptrend is developing.