If you wish to maximize profit and minimize when trading crypto, knowing how to identify a market trend is essential.
What Is A Market Trend?
A market trend is a perceived direction of an asset’s price movement over a particular period. This term applies not only to cryptocurrencies but also to other types of assets and markets where values and trading volumes fluctuate, such as foreign exchange, stocks, bonds, and so on.
What You Need To Know About Market Trends
Crypto enthusiasts often say that “a trend is your friend”, which means that a trading strategy combined with an identified market trend is likely to yield higher profits.
There are three main market trend types:
- Uptrend. In an upward market trend, aka bullish trend, the price of a cryptocurrency is rising, forming higher highs where buyers are in a stronger position than sellers.
- Downtrend. In a downward market trend, aka bearish trend, the price of an asset decreases and creates lower lows in the chart. For traders, this means that sellers are currently stronger than buyers.
- Sideways trend. This is when the price of an asset doesn’t display any definitive bullish or bearish trends.
The market trend definition is tightly intertwined with technical analysis. It is a discipline that relies on historical data and the pattern-based signals (technical indicators) that traders use to make forecasts.
Some of the key indicators that help to identify a crypto market trend are:
- The Ichimoku Cloud – a versatile indicator that features multiple lines and helps to see the trend direction, define support and resistance, gauge momentum, and more.
- The Golden Cross – this indicator appears when a short-term moving average of a crypto asset rises above a long-term moving average. It is usually a signal of a strong bull market.
- The Death Cross – The opposite of the Golden Cross, which signals a bearish movement.
The list goes on! Note that even if you notice a market trend, it doesn’t eliminate the trading risks. Thus, having a sustainable trading strategy is essential to trade crypto in the long run.
