List of Financial Market Terms

In day trading, downtrend illustrates the movement of a stock when the overall direction is downward. Formal downtrends occur when each successive peak and trough is lower than the previous one.

Traders preferring long positions, whether stock trading, options trading, or futures trading, try to avoid downtrends because of the havok it can wreak on a buy side position.

Downtrends can last for minutes, days, weeks, months, or even years.  Once a downtrend has been identified a Trader should be very cautious about entering into any new long positions, and may choose to opt out of any bullish options trading associated with the particular stock.

Here's a great example of a downtrend, taken straight from the live trading room:

downtrend in stock - VIX etf

The inverse of a downtrend is an uptrend.

Related terms: uptrend, primary trend, secondary trend, minor (short term) trend, and trend channel.

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