Market Trend
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A market trend is a systematic pattern of the movement of a market. It is the general direction in which a market moves or a notable changeless pattern. Market trends can be determined by studying market data over a period of time and is used to predict the movement of prices going ahead.
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Market Trends: Types of Trends
Market trends can be classified into:
A market trend is a systematic pattern of the movement of a market. It is the general direction in which a market moves or a notable changeless pattern. Market trends can be determined by studying market data over a period of time and is used to predict the movement of prices going ahead.
Market Trends: Types of Trends
Market trends can be classified into:
- Primary Market Trend: It usually lasts for a year or more.
Bull Market: This is an uptrend, with rising share prices. It occurs when investors trust the market to yield high capital gains in the future. This optimism boosts the financial markets.
Bear Market: This is a consistent decline in the price of most of the stocks in the market. Ubiquitous pessimism and the anticipation of losses encourage investors to sell even at very low prices.
Market Bottom: This is when the stock prices hit rock bottom. Also known as recession, its occurrence is difficult to predict. A market bottom is followed by an upturn, although the time that the market spends being at the bottom may be unpredictable and the initial phase of the upturn may be volatile.
- Secondary Market Trends: These are short-lived price fluctuations that may last from a few weeks to some months. During this period, the rise in prices is known as a bear market rally and a decline in prices is called market correction.
- Secular Market Trend: It consists of consecutive primary trends that can last from five to twenty-five years.
Secular Bull Market: In such a market, the losses caused by a primary bear market are less severe. This is a relative statement, as the primary bull markets in this phase reward in a manner that covers all the losses suffered in the past.
Secular Bear Market: In this market, gains from a primary bull market do not exceed the damage caused by primary bear markets.
How to Identify Market Trends
To find out the direction in which the financial market is moving, one needs to have information on share prices and traded volumes. This can be obtained easily as the daily sales data is made available by various websites and financial institutions. Stockbrokers generally look at three indices – NASDAQ, Dow and S&P500 – to determine the market trend. However, an investor must remember that it is not possible to predict the market with complete accuracy.
