Tertiary trend
Also written Minor trend · Tertiary trends · Short-term trend
The 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.
In plain language
Dow Theory says a market has 3 trends running at once, nested inside each other. The tertiary trend is the smallest of them.
It lasts a few days to a few weeks. It jumps around on news and earnings. It reverses often, and it can run either with the bigger trend or against it.
To a long-term investor most of this is noise worth ignoring. To a short-term trader it is where the work happens — it is what sets the exact day to buy or sell inside a much longer move.
How it works
Where it sits. The second tenet of Dow Theory, in 15.3.1, is that the market has 3 trends: a primary trend that is a long-term bull or bear movement, a secondary trend that corrects or rallies within it over weeks to months, and the tertiary trend, "a minor trend" reflecting short-term fluctuations of days to weeks. The tertiary is the smallest wave in the hierarchy.
Duration — and the workbook gives 2 answers. Section 15.4.3 says a tertiary trend "typically lasts less than three weeks, though some definitions extend this to up to six weeks." Both figures are in the workbook, so learn both; the section heading text also puts it more loosely as "a few days to a few weeks."
Behaviour. Highly volatile and reactive to news, earnings reports or geopolitical events. Volume may spike on breakouts and breakdowns, but volume patterns are less reliable here than in primary trends. It can move with or against the prevailing primary or secondary trend, and it reverses frequently and quickly — which makes it unreliable for long-term forecasting.
Tools the workbook names. 5-day, 10-day or 20-day EMAs for trend confirmation; RSI and the Stochastic Oscillator for momentum; candlestick patterns such as engulfing, Doji and Morning Star; volume analysis to sort real breakouts from false ones; and support and resistance levels, especially intraday or weekly pivots.
Why bother. It fine-tunes entry and exit points inside a larger trend, allows tight stop-loss placement and short-term hedging, reflects market psychology, and forms the building blocks of larger chart patterns like flags, pennants or wedges.
The risks. Noise mistaken for signal in choppy or sideways markets; whipsaws and false breakouts; and overtrading, which raises transaction costs and risk.
A worked example
The workbook's own illustration, with illustrative rupee levels added. A stock is in a primary uptrend over 6 months, running from Rs 400 to Rs 560. Within that, a secondary correction takes 5 weeks and pulls it back to Rs 505.
During those 5 weeks of correction, the stock puts in a series of short rallies and pullbacks, each lasting 3 to 5 days: Rs 505 up to Rs 522, back to Rs 508, up to Rs 519, down to Rs 503.
| Layer | Move | Duration |
|---|---|---|
| Primary | Rs 400 to Rs 560 | 6 months |
| Secondary | Rs 560 down to Rs 505 | 5 weeks |
| Tertiary | Rs 505 to Rs 522 to Rs 508 and so on | 3 to 5 days each |
Those 3-to-5-day swings are the tertiary trends. The workbook's verdict on them is careful: they "may offer opportunities for nimble traders but are not indicative of a long-term reversal." A trader who sold the whole position on the Rs 522 to Rs 508 leg read a tertiary move as a primary one.
Why NISM asks about it
Chapter 15.3.1 introduces the 3 trends as the second tenet of Dow Theory, and 15.4.3 (Tertiary Trend) then covers this one in full — characteristics, tools, uses and limitations.
Expect a duration question, which is where the workbook's 2 figures matter, and a hierarchy question asking which of the 3 trends a described move belongs to. A third reliable question is on the tools: 5, 10 and 20-day EMAs rather than the 50 or 100-day averages used to confirm a primary trend.
Common exam traps
- The workbook gives 2 durations and they differ. "Typically lasts less than three weeks" and "some definitions extend this to up to six weeks" both appear in 15.4.3. Neither is wrong; do not pick one and forget the other.
- Tertiary is days to weeks; secondary is weeks to months. Losing that boundary is the commonest error in this section.
- A tertiary trend can run with the primary trend, not only against it. The workbook says "with or against."
- Volume is a weaker guide here. The workbook explicitly downgrades volume patterns in tertiary trends relative to primary trends, which reverses the usual Dow Theory emphasis on volume confirmation.
- Dow Theory has 3 trends, not 4. The chapter's Sample Question 1 is built on exactly this: "the market has four trends" is the option that is not a tenet.
- Short-term does not mean profitable. The workbook lists overtrading and whipsaws as specific risks of trading these moves.
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.
- Engulfing patternA two-candle reversal pattern in which the second candle's real body completely swallows the first candle's body — green over red is bullish, red over green is bearish.
- Flag and pennantContinuation patterns in which price pauses sideways after a sharp rally — in a rectangle (flag) or a small triangle (pennant) — before the original move resumes.
- 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.
- RSIA momentum oscillator scaled 0 to 100 that measures the speed and size of recent price changes — conventionally read as overbought above 70 and oversold below 30.
- Secondary trendAn 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.
- Day traderA trader whose entire investment and disinvestment cycle is completed within a single day, taking no position home overnight.