Secondary trend
An intermediate correction or rally that runs counter to the dominant primary trend, typically lasting a few weeks to a few months, before the primary trend resumes.
In plain language
A market moving strongly in one direction rarely goes there in a straight line. Along the way, it usually pulls back or bounces for a while before resuming its main course.
That pullback or bounce is the secondary trend — shorter than the primary trend it interrupts, and not, by itself, a sign the primary trend has ended.
How it works
The workbook: "A secondary trend is an intermediate movement that corrects or retraces the direction of the prevailing primary trend. These trends typically last from a few weeks to several months." In a bull market, this shows up as a correction (often a 10–20% decline); in a bear market, as a relief rally. Per Dow Theory, the retracement typically runs from one-third to two-thirds of the prior primary move, usually on lower volume than the primary trend itself — a lack of conviction the workbook flags as a defining feature. Analysts use tools such as Fibonacci retracement, trendlines, 50-day moving averages and RSI or Stochastic oscillators to identify one.
A worked example
The workbook's own case study: within the Nifty 50's post-COVID bullish primary trend, the September–October 2020 correction of roughly 7% is its named secondary trend — a global risk-off move that pulled the index down temporarily. The workbook is explicit about the outcome: "the market resumed its uptrend, reaching new highs by early 2021," confirming the correction never became a new primary trend of its own.
Why NISM asks about it
Chapter 15.4.2 (Secondary Trend) uses the same Nifty 50 2020–2021 case study as the primary trend section. Expect a question testing the typical duration (weeks to months) and volume signature (lower than the primary trend) of a secondary trend.
Common exam traps
- A secondary trend is a correction within an intact primary trend, not a new trend of its own. The workbook's own Nifty example resumed its primary uptrend after the correction — mistaking the correction for a trend reversal is the error this section is built to catch.
- Secondary trend volumes are typically lower than the primary trend's — a direct, testable distinguishing point.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Dow TheoryCharles Dow's six-tenet framework: the market discounts everything, moves in primary, secondary and tertiary trends, must be confirmed by indices and volume, and trends persist until clearly reversed.
- Moving averageThe average price of a share over a rolling window, recalculated each session — it smooths away daily noise so that the underlying trend, and changes in it, become visible.
- Primary trendThe dominant, long-term direction of a market or stock — bull, bear or sideways — typically lasting a year or more, driven by macro-economic forces and investor sentiment.
- Tertiary trendThe smallest of Dow Theory's three trends — a short-term move of a few days to a few weeks, often running against the primary or secondary trend.