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 assumption: Freely traded, market prices, in general, travel in trends.

Based on this assumption, traders and investors ...

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