Posted in Finance, Accounting and Economics Terms, Total Reads: 255
Uptrend as the name suggests, means anything that is moving in a positive direction. It means that the growth is positive. It is a part of the trend analysis which helps the traders to predict what will happen in the future of the stock price depending on the past stock prices of the same stock. Uptrend and downtrend are a part of Trend analysis.
Uptrend in stocks means that the stock price is increasing and the shareholders are keen to invest in the company and are confident of its growth. Uptrend of stock is known as bull market whereas downtrend of stocks is known as bear market. Uptrend can last from several months to several years.
Most investors never make any decisions against the trend as it is difficult to predict when it will change. If the price falls below the previous value, the uptrend is broken and shifts to be a downtrend and the market subsequently declines.
As we can see in the diagram below, peak 2 is lower than peak 4 which is lower than peak 6. Similarly trough 1 is lower than trough 3 which is lower than trough 5. This is an example of an uptrend.
The goal of most stock traders is to find out the uptrend and to maximize the profits from them until the trend reverses. For example, if we can predict that the trend is going to change after peak 6, the profits will be maximum if we buy a share at point 1 and sell it at point 6 (according to the diagram).
It is a wise decision to sell an asset once the financial entity fails to create a new peak or trough. This can minimize the losses.