What is trend analysis? Trend analysis, as the name suggests, is an important part of technical analysis, which helps estimate the movement of stocks based on historical data. Trend analysis is based on the notion that analyzing the past data will give traders an idea of what is most likely to happen in the near future. It is extremely helpful for businesses since moving with the trend will result in substantial profits. There are three major trend analysis methods, namely geographic trend analysis, temporal trend analysis, and intuitive trend analysis. But before we deep-dive into each of these trend analysis methods, let’s take a look at how to best use trend analysis for continued business success.
To effectively analyze the applicable data, it is imperative to determine the market segment that must be analyzed. Once the market segment is selected, it becomes much simpler to study the general performance of the target segment. This includes analyzing how the market segment was affected by external and internal factors. The data which is then collected can be leveraged to predict the future direction of the target market segment.
Now that we’ve laid down the foundation for what’s trend analysis and how to leverage it for your business’ success, let’s look at some of the popular trend analysis methods:
Geographic trend analysis
This is perhaps one of the easiest and most reliable trend analysis methods. To do this, simply visit a country, city, or region where a particular trend is taking off and try to predict the rate at which it will spread – if not to the whole world, at least to some other areas. A couple of decades back, one of the automotive pioneers visited Tokyo and came back singing gospels of how smaller, fuel-efficient vehicles are the next big thing in the automotive market. Fast forward a decade and you’ll see how much of an impact the trend of smaller, fuel-efficient vehicles has had on the global automotive market.
Temporal trend analysis
Temporal trend analysis allows analysts to study and model the behavior of a variable in a data set over a period of time. This is one of the trend analysis methods that’s a little tricky for novices. Temporal trend analysis can be a little misleading if it’s applied to random activities or if a critical factor is left out. It can be used to estimate changes in the economy by analyzing the impact of regulatory changes on exports and imports or assessing the influence of terrorist activities on the economy.
Intuitive trend analysis
One of the most common trend analysis methods, intuitive trend analysis relies heavily on the analysts’ ability to process and understand all the information about a topic and predict its logical outcome. Such trend analysis methods are extremely difficult to execute effectively since numerous external factors play a critical role in shaping the outcome.