In fact, there are 3 trends that you need to be familiar with. Firstly, there are primary trends, then there are secondary trends and finally there are tertiary trends. At the base of technical analysis is this classification of trends in the stock prices into 3 different time-based categories called the primary trend, secondary trend and the tertiary trend. Your approach to trading will be based on whether the trend you are analyzing is a primary trend, secondary or tertiary trend. Your trading strategy is actually contingent on whether the trend that you have identified is a primary trend, secondary trend or a tertiary trend.

Let us look at the primary trend first. A primary trend is normally called the inviolable trend. It lasts for a period of more than 1 year and can even last for a number of years in succession. This is a trend that stays sacrosanct for a longer period of time irrespective of the short term volatility in the stock prices and the indices. It is that primary trend that determines if the market is in a bull grip or in a bear grip.

Within this primary trend there are multiple secondary trends that last for a period of 3 weeks to 3 months. These are the short to intermittent trends where you can trade even in a direction that is temporarily opposite to the primary trend. These could normally be opposite in direction of the primary trend. For example, within a bull market primary trend, there could be secondary trend in the form of a 3 month correction. Alternatively, there could be a 1 month bounce in a market where the underlying primary trend is bearish.

What do we understand by tertiary trends? In technical and statistical parlance they are called noise or the random fluctuations in the price of stock or the index. These are extremely short term in nature and can extend from a day to a week. The critical thing about the tertiary trend is that you need to distinguish between this tertiary trend and the secondary trend. The secondary trend is tradable but the tertiary trend is not exactly tradable unless you adopt a shoot and scoot approach like an intraday trader. The tertiary trend is also called noise in technical analysis and can last from 1 day to a couple of weeks. Traders need to be careful about tertiary trends, especially if they are contrary to the primary trends.