Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Trend Analysis

What it is:

Trend analysis is a technical analysis of the movement of a stock based on past performance.

How it works (Example):

A trend analysis is a method of analysis that allows traders to predict what will happen with a stock in the future.  Trend analysis is based on historical data about the stock's performance given the overall trends of the market and particular indicators within the market.

Trend analysis takes into account historical data points for a stock and, controlling for other factors like the general changes in the sector, market conditions, competition for similar stocks, it allows traders to forecast short, intermediate, and long term possibilities for the stock.

Why it Matters:

By watching the general trends of the markets, a trader may be able to match purchases and sales of particular stocks, maximizing his or her potential for profits. At the same time, it is important to look at historical data in a larger context of conditions for the underlying company to understand if there are factors that may affect a stock's value irrespective of general market conditions or past performance.  For example, a trader should look inside the financial conditions of the company, understand the market and technologies, and anticipate competitive pressures on the company within its sector.  All of these tolls, as well as trend analysis, benefit a trader.  

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...