Different types of trends in Technical Analysis charts and Their Uses

Nilesh Jain

29 Oct 2016

Trends can be classified into three types:
- Uptrend
- Downtrend
- Sideways/Horizontal trend

Uptrend In Technical Analysis Chart:

When a particular stock is making higher highs & higher lows, that stock is considered to be in uptrend. Higher highs indicate that the stock is making consecutive peaks than previous highs. Higher lows indicate that bottom is higher than the previous lows.

When stock is in uptrend, it is advisable to buy on dips. The optimism is that the stock may rise further. The uptrend may last as short as few weeks or as long as few years.

As you can see from following chart, Nifty was in uptrend from Feb 2016 to Sept 2016

Technical Analysis Chart- Uptrend

Technical Analysis Chart - Uptrend

The line which is connecting higher high & higher low is called Trend line. The higher high trend line is called resistance line and higher low trend line is called support line.

Downtrend In Technical Analysis Chart:

When the stock is making lower highs & lower lows, it is considered to be in downtrend. Lower highs mean that previous peak is higher than the current peak. Lower lows mean the current bottom is lower than the previous bottom.

When the stock is in downtrend, it is advisable to sell on bounces as there is pessimism that stock could fall further.

As you can see from following chart, JUSTDIAL was in complete downtrend since August 2014 to March 2016

Technical Analysis Chart- Downtrend

Technical Analysis Chart - Downtrend

Sideways Trend in Technical Analysis Chart

When the sstock trades in a range, it is called sideways trend. Sideways trend occurs when the force of demand & supply are nearly equal. A sideways trend is also called ‘horizontal trend’

As you can see from the following chart TATACOFFEE was in sideways trend since July 2013 to July 2016

Technical Analysis Chart- Sideways trend

Technical Analysis Chart – sideways trend

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Different types of trends in Technical Analysis charts and Their Uses

Nilesh Jain

29 Oct 2016

Trends can be classified into three types:
- Uptrend
- Downtrend
- Sideways/Horizontal trend

Uptrend In Technical Analysis Chart:

When a particular stock is making higher highs & higher lows, that stock is considered to be in uptrend. Higher highs indicate that the stock is making consecutive peaks than previous highs. Higher lows indicate that bottom is higher than the previous lows.

When stock is in uptrend, it is advisable to buy on dips. The optimism is that the stock may rise further. The uptrend may last as short as few weeks or as long as few years.

As you can see from following chart, Nifty was in uptrend from Feb 2016 to Sept 2016

Technical Analysis Chart- Uptrend

Technical Analysis Chart - Uptrend

The line which is connecting higher high & higher low is called Trend line. The higher high trend line is called resistance line and higher low trend line is called support line.

Downtrend In Technical Analysis Chart:

When the stock is making lower highs & lower lows, it is considered to be in downtrend. Lower highs mean that previous peak is higher than the current peak. Lower lows mean the current bottom is lower than the previous bottom.

When the stock is in downtrend, it is advisable to sell on bounces as there is pessimism that stock could fall further.

As you can see from following chart, JUSTDIAL was in complete downtrend since August 2014 to March 2016

Technical Analysis Chart- Downtrend

Technical Analysis Chart - Downtrend

Sideways Trend in Technical Analysis Chart

When the sstock trades in a range, it is called sideways trend. Sideways trend occurs when the force of demand & supply are nearly equal. A sideways trend is also called ‘horizontal trend’

As you can see from the following chart TATACOFFEE was in sideways trend since July 2013 to July 2016

Technical Analysis Chart- Sideways trend

Technical Analysis Chart – sideways trend

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