A market trend is a hypothetical tendency of a financial market to move in a specific direction over the time. These trends are divided as secondary trends for short time frames and primary trends for medium time and secular trends for long time frames. Market trends are identified by traders by using technical analysis. Technical analysis is a frame work which characterizes market trends as an anticipated price response of market at levels of price support and price resistance, changing over time.
There are terms bear market and bull market that explains downward and upward market trends respectively, and these can be used to illustrate either the market as a whole or specific securities and sectors.
a. Secular market trends: This trend is long term trend that last 5 to 25 years and contains of a series of consecutive primary trends .
b. Primary market trends: Primary trends have extensive support during the entire market or market sector and last for a year or more.
- Bull market: A bull market is concerned with increasing confidence of investor, and increase the investment in anticipation of increase the price in future. A bullish trend starts in the stock market before the showing clear signs of recovery by general economy.
- Bear market: A bear market decreases the stock market for a period of time. It is a conversion from optimism of investor to pessimism or fear.
- Market top: When market has reached the highest point for few years.
- Market bottom: When market is reached the lowest point is called as market bottom. This will give loss the investor who bought the stocks.
c. Secondary market trends: These trends are short term movements in direction of price within primary trend, duration is few months or few weeks.