Chart Phases

Question 1

What is a Trend?

Answer 1

• If the price rises over a period, it’s called a rally, a bull market, or just an upward trend.
• If the price falls continuously, it’s called a bear market, a sell-off, or a downward trend.

Question 2

What’s considered a correction?

Answer 2

Corrections are short price movements against the prevailing trend direction. During an upward trend, corrections are short-term phases in which the price falls.

Question 3

What’s considered a Consolidation?

Answer 3

Consolidations are sideways phases. During a sideways phase, the price moves sideways in a usually clearly defined price corridor and there are no impulses to start a trend.

Question 4

What are Breakouts?

Answer 4

The buyers and the sellers are in equilibrium during a sideways phase. If the strength ratio between the buyers and the sellers changes during consolidations and one side of the market players wins the majority, a breakout occurs from such a sideways phase. The price then starts a new trend. Breakouts are, therefore, a link between consolidations and new trends.

Question 5

What is a Trend reversal?

Answer 5

If a correction continues for a long time and if its intensity increases, a correction can also lead to a complete trend reversal and initiate a new trend. Like breakouts, trend reversal scenarios, thus, signal a transition in prices from one market phase to the next.

Question 6

What’s the Difference of a Retracement vs. Reversal?

Answer 6

• Retracements are temporary price reversals that take place within a larger trend.
• A reversal is when the trend changes direction, and the price is likely to continue in that reversal direction for an extended period.