Definition
The term market trend is used to describe the upward or downward movement of a financial market over time. Market trends fall into one of three classifications: secular, primary, and secondary.
Explanation
Financial markets have a tendency to move in either an upward or downward direction over time. The duration of that trend will determine if it is classified as secular, primary, or secondary. The difference between these three trends is described below.
Secular Trend: consists of a series of primary trends in the same direction, with corrections of relatively short duration. A secular trend can last anywhere from five to as many as 25 years. For example, a secular bull market will consist of a series of bull markets that dominate an occasional bear market.
Primary Trend: the most commonly discussed market trend, a primary trend will last for twelve months or more. A bear market is a decline in the value of a financial market over time, while a bull market is a rise in the value of a financial market over time.
Secondary Trend: relatively short in duration, lasting only a few weeks to months, a secondary trend is a reversal of a primary trend. If the primary trend is bullish, the secondary trend would be a bear market, which is referred to as a market "correction." If the primary trend is bearish, the secondary trend would be a bull market, which is referred to as a "suckers" rally.
Cryptocurrencies are a good market trend example. As the volatility of the crypto market is really high. For example, cryptocurrency statistics show that "Bitcoin has increased in value from 2012 to April of 2022 by 208,900%"
Related Terms
The term dead cat bounce refers to a temporary increase in a financial market, or individual security, after a sustained decline. Oftentimes, the phrase dead cat bounce refers to the temporary recovery of a security deemed to be of low quality.
Moneyzine EditorNovember 6th, 2024
The term bull market refers to a period of time during which there is an increase in the value of equities traded on a stock market. There is no widely accepted definition of a bull market in terms of duration or magnitude of the increase.Moneyzine EditorNovember 6th, 2024
The term bear market refers to an extended period of time during which there is a decline in the value of equities traded on a stock market. While there is no strict definition, a decline of 20% or more in a market index would be considered a confirmation of a bear market.Moneyzine EditorNovember 6th, 2024
The term market correction refers to the downward movement of a financial market or individual security. A market correction is classified as a secondary trend, since they are usually short in duration.Moneyzine EditorNovember 6th, 2024
The term market sentiment is used to describe the prevailing attitude of investors towards a financial market or individual security. Market sentiment develops over time, and is based on a large body of information including both fundamental and technical factors.Moneyzine EditorNovember 6th, 2024
