There are three basic categories of trend: major, intermediate, and near term. Some trends last for only minutes, some hours, some months or they can even last for fifty years or more. An long term investor’s idea of a trend’s category, for the most part, is the same as a stock trader with one exception. An investor defines a major trend as one which is in effect for over a year. The trader views a major trend as any over six months. Both, usually, define an intermediate trend as lasting three weeks to three months, and a near term trend as one lasting only two to three weeks. Then again, a day trader’s definition may be considerably less in all cases.
When looking at a major uptrend, you will see occasional pauses, or a somewhat sideways movement of highs and lows. The pauses are called corrections. The corrections are made up of a series of intermediate and near term trends.
In the figure below, you see an overall major uptrend reflected in the peaks and valleys labeled 1,2, 3, 4. An intermediate phase is found between points 2 and 3, and nestled between points 2 and 3, you will see a near term trend labeled A,B,C. Even though the intermediate and near term trends went down, a trader would still call this an uptrend.
Confusion occurs sometimes what a person asks what the trend is because of the different traders’ perceptions. Long term traders or investors may view a few days or even weeks movement in price insignificant. Whereas, a stock trader sees a major uptrend when viewing just 2 or 3 days movement, and a day trader in the movement over a few hours. The different perceptions makes it necessary to understand the degrees of trend so you will know you are on the same page as others involved in the same trade.
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