A market trend is the general direction of an asset price or volume. Trends can be long-term or short-term. They can be applied to stocks, bonds, commodities and other financial assets. Trend analysis is a component of technical analysis and is based on historical price movements. Trends are influenced by supply versus demand dynamics and market volatility.
A good market trend is one that shows a positive direction and an upward movement in the prices of the asset. This may show that the economy is growing and that there are more jobs available. It is also a sign that consumers are willing to spend more money on the asset.
In contrast, a market downtrend is one that shows a negative direction and a downward movement in the prices of the asset. This could show that the economy is slowing down and there are more job cuts. It is also a sign that consumers will spend less money on the asset.
To identify the market trends, traders use line graphs. They draw a trend line between three high points and if the trend line points down, then the market is on a downtrend.
Market trends can be shaped by economic policy and other macro concepts like demographics, technology and social issues. The popularity of baby names can be a good example of how cultural changes can affect customer needs. For example, Alexa was once one of the most popular baby names in the US but fell from the top 50 after Amazon launched its voice assistant in 2015. Similarly, the decline of Nokia’s mobile phone sales is a reminder that keeping up with market trends is key to developing smarter marketing and product strategy.