Euro / Dollar AméricainÉducation
Classification of trends
In an earlier note, we defined a trend as a period in which price moves in an irregular but persistent direction. It could also be a time measurement of the direction in price levels.
The three common classifications of trends are: primary, intermediate and short-term trends.
Primary trends: This trend revolves around the business cycle which lasts for 3.6 years from one bottom to the next bottom or from one top to the next top. Bull and bear trends respectively last for 1 to 2 years, though the magnitude and duration may be significantly different at various times. Reversal price patterns in primary trends usually take longer than three months to complete. You can find primary trends on the higher time frames like the monthly time frame. This is a EURUSD chart on the monthly time frame of a bull trend illustrating how long a primary trend on the bull side or bear side can last.
Intermediate trends: When primary uptrends and downtrends are interrupted by countercyclical corrections along the way, they give rise to intermediate trends. These last from 6 weeks to 9 months, and could last even longer, or could even be shorter than 6 weeks in some occasions. Reversal price patterns in intermediate trends could take from 3 to 6 weeks to form and its duration depends on the duration and magnitude of the intermediate trend preceding it. Intermediate trends are usually found on the weekly time frame.
Short-term trends: These trends are countercyclical corrections in intermediate trends, and sometimes they align with the intermediate trend. They typically last 3 to 4 weeks and could sometimes be shorter or longer. They are usually influenced by random news events and could be difficult to identify. Price patterns in short-term trends can take 1 to 2 weeks to develop. These trends can be spotted on the weekly, daily, and 4 hours time frames. Below is a EURUSD chart showing countercyclical trends on the daily when compared to the intermediate trend, the weekly, which was in a downtrend.
Next we will discuss how understanding trends and their categories has consequences on understanding how price patterns will probably turn out.
The three common classifications of trends are: primary, intermediate and short-term trends.
Primary trends: This trend revolves around the business cycle which lasts for 3.6 years from one bottom to the next bottom or from one top to the next top. Bull and bear trends respectively last for 1 to 2 years, though the magnitude and duration may be significantly different at various times. Reversal price patterns in primary trends usually take longer than three months to complete. You can find primary trends on the higher time frames like the monthly time frame. This is a EURUSD chart on the monthly time frame of a bull trend illustrating how long a primary trend on the bull side or bear side can last.
Intermediate trends: When primary uptrends and downtrends are interrupted by countercyclical corrections along the way, they give rise to intermediate trends. These last from 6 weeks to 9 months, and could last even longer, or could even be shorter than 6 weeks in some occasions. Reversal price patterns in intermediate trends could take from 3 to 6 weeks to form and its duration depends on the duration and magnitude of the intermediate trend preceding it. Intermediate trends are usually found on the weekly time frame.
Short-term trends: These trends are countercyclical corrections in intermediate trends, and sometimes they align with the intermediate trend. They typically last 3 to 4 weeks and could sometimes be shorter or longer. They are usually influenced by random news events and could be difficult to identify. Price patterns in short-term trends can take 1 to 2 weeks to develop. These trends can be spotted on the weekly, daily, and 4 hours time frames. Below is a EURUSD chart showing countercyclical trends on the daily when compared to the intermediate trend, the weekly, which was in a downtrend.
Next we will discuss how understanding trends and their categories has consequences on understanding how price patterns will probably turn out.
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