What is a trend?

What a trend looks like

The price never moves in a straight line. Even in a long rise there are days and weeks of decline. What makes it an uptrend is that each decline ends higher than the last, and that the next high is higher. A downtrend is the opposite. If the highs and lows stay about level, the price is going sideways.

Here are the two companies that have spent the most and the least time above their 200-day average in the last two years:

You can't say exactly where a trend begins and ends. It depends on how far back you look. A short decline can sit inside a long rise, so the trend can point different ways over a month and over two years.

How often was the price above the average?

Here are the five companies that were above their average on the most days since 2000, and the five that were on the fewest.

For the middle of the 20 companies, the price was above the average on 69% of days. That is more than half, but these are today's largest companies, which as a rule have risen. Companies that left the market aren't included.

Trends are often shared. The share was lowest on Dec 30, 2008, when 0% of the companies were above their average, and highest on Oct 29, 2024: 100%. Only companies with at least 200 trading days behind them count.

Do trends last?

A price that was above its average was still above it a month later in 89% of cases. A price below it was still below in 75%.

That sounds as if trends last, but much of it is plain arithmetic. The 200-day average moves slowly, so a price some way above it has to fall quite far to end up under it. So it doesn't say the price rises just because it is above. What the price actually gave from each position is in the lesson on the 200-day average.

What a market that has fallen sharply is called is in bull and bear markets.