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Learn Stock Market Trading Tips
How
To Identify Stock Market Trends
If there was ever an industry that would benefit
if psychics were real, it would be stock investing. Much
of investors’ and brokers’ time is spent trying to predict
what
the market will do in the next few days to months. However,
the process is not all speculative guessing. If one pays close
attention, the market will actually indicate which way it is
going. Learning to read the signs of the market takes a little
time and patience but the rewards will be great.
The
market itself can indicate how a stock will fare in the
coming months. Looking at the overall direction of the market
will tell you about future trends. Most, if not all, stocks
move with the market. If the stock market is experience a period
of growth (a bull market) most stocks will steadily grow. If
the stock market is in a decline (a bear market) most stocks
will slowly lose value. There may be one day bumps here and
there but the general trend will follow the flow of the market
at large. Two determine the direction of the market only two
pieces of information are needed; price and volume. Price refers
to the trend of prices of stocks. Volume refers to the amount
of stocks being traded. When these two figures are put together
it reveals whether there are more sellers in the market or
there are more buyers.
To
determine price, investors and brokers use
the big three indicators: the Dow Jones Index, the S & P
500 and the NASDAQ. These indicators help investors and brokers
determine
whether the market is going to continue in the current trend
or reverse course.
To
determine volume, investors and brokers look to the daily
sales volume of the markets. The daily sales volume is easily
obtained from several websites online.
If the market has experienced a high-volume
day and prices are up (on the three indexes) then the market is up. When these
conditions exist larger investors, such as institutional investors
and mutual funds, will buy more and will boost the market further
upwards.
Conversely, if the market had a high-volume
day but prices on the indexes are down, this can indicate that more stocks
are being sold. It is a sign of the bigger investors backing
out of the stock market and can be a sign of a downward turn.
However, a high-volume, low-price day does not necessarily
mean a turn for the worse. Often times if there are several
days in a row with high-volume and high prices, there will
be a day where the volume remains the same and the prices decrease.
This trend is referred to as “profit taking” and is a result
of investors taking the profits they built up in the last few
days.
If there is a continual
presence of down days in the market,
it could be a sign of a stall or a reversal of course. Institutional
investors and mutual funds buy and sell in large volume which
means they have the power to move the market. When they begin
moving in a direction, the rest of the market follows.
In addition to these larger investors, there are also other
factors that move the market. Inflation and interest
rates can affect people’s ability to invest in the stock market. War, terrorism and serious political unrest can cause negative
turns in the stock market as well. The market is most often
affected by uncertainty in the future. If there is a chance
something in the country might change, its effects are shown
in the marketplace. Surprising news and unexpected events disturb
the sense of control that the stock market has. If not watched
carefully these unexpected events can send the market into
a downward trend, or worse, a tailspin.
Watch for signs of the market changing course and prepare
yourself as best you can for other factors. If you need to
sell a stock keep a watch on the company’s earning reports,
Fed meetings and other relatively predictable events that can
take points from your stock. However, the bumps that occur
on a daily basis will smooth over rather quickly and do not
affect most investors. # # # # # SolveYourProblem.com : 2007
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