A Set of Assumptions about Short-Term Trends

When you look only at price and attempt to anticipate which direction it will take next, you have to operate on a set of assumptions. The greatest of these is that price acts and reacts within the current trend. If you do not recognize a trend, then the price is truly random. Some stocks are both volatile and unclear about direction, which makes any kind of trade timing both difficult and risky. However, this is often a short-term problem, whereas longer-term trend analysis is likely to identify clear trends characterized by short-term chaotic and random movement with overall identifiable direction.

The second assumption is that price movement is a reflection of supply and demand in the market. Although ...

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