There are three basic principles of technical analysis, one of which is: the market evolves in a trending manner.
So, what is a trend? How should we interpret market trends and utilize them?
In technical analysis, the concept of trends is absolutely the core content. All the tools we use to analyze charts, such as support & resistance, moving averages, price patterns, etc., are to help us see market trends clearly, so we can trade along with the trend.
There are three directions of trends:
Upward Trend
Downward Trend
Horizontal Extension (also known as a range)
At the same time, trends have three different levels: primary trend, secondary trend, and short-term trend. Also known as 'large, medium, small'. The saying 'follow the large, counter the medium, follow the small' refers to different levels of trends.
Each trend is composed of smaller level trends and is also part of larger level trends. In the cryptocurrency market, we usually focus on daily level trends, which are the primary trends, while the corresponding secondary trend can be the 4-hour level trend, and the short-term trend can be determined as the 1-hour level. This is also a commonly used trend framework: D1-H4-H1.
When we discuss trends, we must first clarify their levels. Trends have various time levels, and understanding their differences in time scale is extremely important for our market analysis.
