How to identify a stock market trend

Firstly it is important to understand the terminology and what a stock market trend is before you try to identify it. Also in understanding market trends you must know what is happens in the economy during each trend and this help you understand what companies will fall first and those that will rise first.

A bull market is a rising market. In a bull market, investors are positive. The economy tends to be strong. Unemployment is low. Consumers are spending money, which increases business profits. When businesses profit, investors demand to share in the profits so buy shares for the dividends or capital growth .

The supply of shares, then, is low as people buy them quickly and no one wants to give up their shares that are paying dividends and rising in value. This strong growth in a company leads traders to buy in similar stock expecting the same results although it might not be the same.

A bear market is a declining market. It tends to begin with a sharp drop in stock prices across the board. There is usually an eye in the storm, during which stock prices increase. But the storm returns, of course, and the bear market falls further. 

History has shown that a bear market tends to level out at 40 percent lower than when it began. Which can wipe out entire fortunes. 

In a bear market, the economy tends to be weak. Unemployment increases. Consumers spend less, which results in lower business profits. As we've seen, this devalues a given company's stock. Traders then sell their stocks which adds to the prices coming down, turning this trend is usually beyond the stock markets and come from economic confidence into retail market.



The Long Run Stock market trend

History has shown that the stock market always rises over the long term. Bear markets and crashes happen, but the market always makes a comeback and eventually rises higher than it ever was before, the long term wealthy accept this trend and therefore prepare for the drops and hold onto their stocks despite the lower costs.

Many professional investors say that determining your investments solely on the basis of whether the market is bullish or bearish is unwise. It is better to base investments on research into strong, competent businesses with plenty of growth potential. Over time, educated and informed investments tend to profit more than investments based on rumor, fear, guesswork and superstition. 

This consistent buying regardless of the market is know as dollar average investing.



What is technical analysis and stock trends

Technical analysis is built around stock trends and is the study of actual movements in share price. Despite what people may tell you, there are only two things that move share prices. They are supply and demand — nothing more and nothing less.

While this is the core, it is remarkable how history repeatedly repeats itself and how what a stock price will do next can be predicted with a high level of accuracy.

At no time does technical analysis attempt to determine why there might be supply and demand, only that certaining trends are occurring and therefore these stock price trends are expected. By studying actual movements in the share price, we can determine, to a great extent, what the present and future trend a company’s shares is and, what market participants may be thinking and can therefore analyse its potential as a trade.

Technical analysts assume that all fundamental and economic influences on a share price are already taken into consideration in the market, so they simply monitor the price action. Many technical analysts go as far as suggesting that fundamentals are not important and are not worth considering at all. But I believe that fundamental information is what crests new stock trends.

The strength of technical analysis is that you are buying and selling on the basis of the actual share price, and stock trends, rather than relying on hypotheses about future value based on profit statements or performance ratios like the P/E ratio or return on equity figures.

It is a very popular way to trade stocks but it does require a large amount of work to develop a trading strategy.

Stock Trend

A stock trend is simple the trend for that specific stock, which is derived from the stock price rangle for each period (typically day) over a number of periods.

While this is simple to describe when this information is graphed it can tell you the life and behaviour of the stock very quickly.

Learning to interpret this graphed data is an important part of any technical traders skills and one that should be practiced daily on graphs from all over the word.


Stock Market Trends

The stock market trends are the trends that the entire market, or majority or large companies are moving in. The stock market trends can be identified by viewing that market index as described in previous posts.

The stock market trend is a very use full tool and some that all technical traders should be using when creating a system because you on want to buy stock in the direction that the market is trending.


How to trade on stock market trends?

The fact that you are reading this you are making the right first step into profitable trading. As you would know from the trading rule, you always trade with the trend.

To be sure your trading with the stock market trend you need to simple look at the graph either with you trading software or by going to yahoo finance and using there search function. 

If you cannot at first see the trend you should draw trend line onto the graph and the trend or lack of reliable trend will become evident.

My best recommendation to all traders is look, learn, practice, check it works, and the trade. And always remember the trend is your friend, don't try to be smarter than the market.