Chapter 2. The Basic Principle of Technical Analysis—The Trend

Chapter Objectives

After reading this chapter, you should be able to

  • Define the term “trend”

  • Explain why determining the trend is important to the technical analyst

  • Distinguish between primary, secondary, short-term, and intraday trends

  • Discuss some of the basic beliefs upon which technical analysis is built

“The art of technical analysis—for it is an art—is to identify trend changes at an early stage and to maintain an investment position until the weight of the evidence indicates that the trend has reversed.” (Pring, 2002)

Technical analysis is based on one major principle—trend. Markets trend. Traders and investors hope to buy a security at the beginning of an uptrend at a low price, ride ...

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