TREND LINES
It reflects the current value of the investment instrument traded on the price. In time, depending on the supply and demand, prices sometimes fluctuate downwards, sometimes upwards and sometimes horizontally. As the demand for the relevant instrument increases, the value of the instrument moves upwards as long as there is demand. When there is no demand, or let's say, as people dispose of the relevant instrument or sell it, the price, which represents the current market value of the instrument, starts to decrease. This decrease or increase sometimes continues in succession. The demand for the instrument is so high that it is constantly received. As it is purchased, due to the market psychology, those who see this purchase start to buy and the price increases in a certain period of time. The same movement is seen in prices in a decrease.
A trend occurs when the price moves in a certain direction over a period of time. We can say the direction that prices form. It creates fluctuations as the price moves in a certain direction. Lines are drawn on the resistances and supports seen in the price to eliminate these fluctuations and show the main direction of the price. These lines show the general trend of prices.
While drawing the lines, the contacts made to the resistance or support points are taken into consideration. The lines with more contact show the strength of the trend. To draw a line, there must be at least two points of resistance or support. If the prices have an upward trend in general, an upward trend occurs. The rising trend is formed by combining support levels. On the contrary, if the prices have a general downward trend, a descending trend occurs. The descending trend is drawn by combining the resistance points.
These lines drawn showed the general direction. So what will it do for us?
If these lines show the general direction and the prices have started to change their direction, the trader who wants to participate in the short-term price movements or the long-term investors who are playing the main trend, waiting for the main trend, move in the direction of their expectations with the changing direction or close their current positions.
When the drawn trend changes, if the investors who see this change in the market have an upward expectation, the investors who know the dynamics of the relevant instrument and maintain their expectations start to take an upward position. The trades seen at this point constitute the transaction volume. Transaction volume gives an important clue in trend changes.
Apart from the increases seen in the transaction volume, hints for change can be found in the technical indicators calculated with the data from the price. Positive or negative mismatches seen in indicators generate strong signals for trend changes.
AUTHOR:
Ali Erkan TANACIOĞLU
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