In this blog, I have often written about cycles of contraction and expansion. If there is one living truth in the markets, this is it.

Yet, money is made in trends. So, how does the trader look at trends?

Trends result in price moving in one direction. There can be any number of variations in the formation of a trend. Therefore, the pattern of how a trend develops is not easy to forecast (It is much easier to forecast that expansion will follow contraction and vice-versa).

In the Nifty, we are in some kind of an uptrend. A normal trend, should see corrections in between. If this is a normal trend, then the Nifty will undergo a correction after a 400 point rally which saw resistance at 5200. But, suppose this is a strong trend? Then, we may not see any meaningful correction at all. And, suppose, this is a weak trend? Then, we may see a deep correction.

My point is: corrections are not easy to predict. Which is why, we try to go with the flow, assume that conditions will be normal unless proved otherwise.

Yet, money is made in trends. So, how does the trader look at trends?

Trends result in price moving in one direction. There can be any number of variations in the formation of a trend. Therefore, the pattern of how a trend develops is not easy to forecast (It is much easier to forecast that expansion will follow contraction and vice-versa).

In the Nifty, we are in some kind of an uptrend. A normal trend, should see corrections in between. If this is a normal trend, then the Nifty will undergo a correction after a 400 point rally which saw resistance at 5200. But, suppose this is a strong trend? Then, we may not see any meaningful correction at all. And, suppose, this is a weak trend? Then, we may see a deep correction.

My point is: corrections are not easy to predict. Which is why, we try to go with the flow, assume that conditions will be normal unless proved otherwise.