Knowing when a market is trending and when it is ranging helps with trading. Traders want to trade in the same direction of the trend and never counter-trend (an old trader motto says: “the trend is your friend”). It is also possible to profitably trade inside RMs but it’s harder, expecially because in EvE it’s impossible to short sell. Therefore once identified a RM, it’s necessary to buy when price hits its bottom and sell when it hits its top.
Which elements make it possible to say “this is a RM” and which others “this is a trend”?
As said above, price moves in a zig zag motion, each zig zag is called “swing”. The placement of the next zig zags determines whether we are in a trend or RM. A zig zag looking like a nice ladder with ascending or descending swings is a trend. A random zig zag with same level or random swings is a RM.
The following picture shows a descending trend or downtrend:
The blue segments are the price swinging down, the “HL” and “LL” labels mark the swings tops and bottoms. In particular, a donwtrend is identified by an orderly sequence of Higher Lows (HL) followed by Lower Lows (LL), like descending a ladder. The red dotted lines and arrows show the zig zags.
The next picture shows an ascending trend or uptrend:
This is exactly the most profitable setup in EvE Online. This time the blue segment (swings) climbs up forming Higher Lows (HL) and then Higher Highs (HH) like a climbing ladder. The zig zags show the same behavior. Uptrends are fairly rare and often caused by new patches altering the demand / supply equilibrium towards the demand side.
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