You have probably heard of the phrase “The trend is your friend”; you must always bear this in mind. To be a successful trader, you must be able to identify market trends using your candlestick stock charts. With this knowledge, you will be able to ride the trend and get off it when the trend reverses itself. You won’t find trends in the stock market news but the news might be the catalysts for a change in the current trend.

There are three types of Trends. There is the short term trend (a few hours), the intermediary trend (a few days) and the long term trend (weeks and months). These trends can either be trends on an individual stock, on a particular industry sector, or on the stock exchange itself. Depending on the type of trader you are, you might want to get really familiar with one or more of them. A trend is the ‘course / tendency or direction of the financial market’. Note that the keyword here is ‘Direction’.

To follow trends, you must first be able to ascertain what direction prices are going in. A direction could be left, right, up, down. Usually, even inexperienced traders can tell a when the market is trending just by looking at charts. Naturally it is better to enter the market at the beginning of the trend so you can ride for as long as possible. The weekly stock chart for Apple below, shows a medium to long term trend.

Note this downward medium to long term trend, as indicated by the arrow, started in September 2012 and is still going on. However, within a medium to long term trends there can be and there very often is, a shorter term trend. Take a look at the hourly stock chart for Apple below.

See how in the last day or so the trend is upwards in the short term which is against the long term trend of downwards shown in the first graphic.

A short term trend is good for short term trading or day trading. The key here is to identify the trend for the day then ride with it. When you identify a short term trend, be sure to ride it for short term only. Share prices change on average 10% a day, so be sure not to exceed the laws of daily change.

Following the intermediate trend is following the trend for several days. This could range from above one day to a few days or even a week or two. If you are following this length of trend, you must know what your candlestick chart patterns mean and take into consideration the highs and lows of previous days so you can make informed decisions on where to enter and exit.

Long term trends can last for weeks and even months. Trading long term means trading with enough risk capital to take daily and weekly fluctuations without the fear of losing your capital.