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Meaning, Definition, Types And Disadvantages Of Trend Analysis

In some fields of research, the word “trend analysis” has more formally defined meanings. Trend analysis is the extensive method of obtaining information and attempting to spot a pattern.

Trend Analysis
Trend analysis

Although tendency analysis is often utilized to predict future events, it could be used to rate uncertain events in the past, such as how many ancient kings possibly ruled between two dates, based on data such as the normal years which other accepted kings reigned.

In project supervision, trend analysis is a precise technique that uses ancient findings to predict future outcome. This is attained by tracking variances in cost and list performance. In this context, it is a program management quality custody tool.

Types of Trend

Uptrend

It is the trend when financial demands and assets move in upward directions, increasing the price. It is usually the time of the explosion in the economy, where overall beliefs are favourable.

Downtrend

In the downtrend or the bear market, the frugality, financial markets, and assets prices stride in the downward direction. It is the time when companies decrease operations and overall investor sentiment is not positive.

Sideways / horizontal Trend

In this, the bargains prices or the broader economy-level are not moving in any way, rather are moving sideways. This means, holding up for some time and then down on the same level. It is a risky activity as investors are hesitant of what will happen to their enterprise.

Disadvantage

One major drawback of trend analysis is that it is not 100% accurate. Or, we can say ahead behaviour is not always indicative of fortune. This is because various factors affect the price of safety (or revenue and expense), and these characteristics change over the period. Also, critics of such a technique argue that markets are profitable, and the stock price already reflects all accessible information. This means that the past won’t repeat itself. Thus, it is always advisable that one must fund technical analysis with substantial research to make a decent prediction.