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• Market Trends

  In the financial market, market trends usually play a valuable role in trying to spot attractive buys or prompt traders to sell. A prevailing market trend is what traders look into to base most of their primary investment strategies in the financial markets. Market trends can be described as periods when buyers outnumber the sellers or vice versa. Market trends can be classified as primary trends, secondary or short term trends and secular or long term trends.There are two types of primary market trends that traders look into- the bull market and the bear market. A bull market is one that is associated with an increase in investor confidence. This helps motivate investors to buy to anticipate further capital gains. A bear market, on the other hand, is one that is associated with widespread investor pessimism. This is a market trend where investors are compelled to sell in anticipating losses, which can turn into a vicious cycle and bring on overall negative sentiment.

  There are also secondary market trends that traders in the financial markets look into. It can be a trend that may cause a temporary change in market prices within a primary trend. Secondary trends, being temporary, lasts usually from a few weeks to a few months. A temporary drop in stock prices during a bull market is known as correction. A temporary increase of market prices during a bear market is termed as a bear market rally.

  Market trends can be caused by various factors. These trends can be initiated by a sound economy, speculation of by general investor behavior. Expectations also play a big role in the development of such market trends. An example of such would be looking into investor reaction towards new data or information, whether it generates positive or negative reactions. This will give rise to either a bull or a bear market, depending on general expectations.

  In trying to read the future direction of the market, traders need to look on the prevailing market trends as well as what they would expect would be coming in the future. Indicators that may help traders perceive market direction would be price and volume. Factors that will affect prices on the market would help identify where the market would be going. Changes in market volume will identify whether there is a movement in the market. Studying these indicators closely would help traders and investors determine certain market trends that will help them in their investing and trading strategies.

  Posted in Investing

  March 17th, 2008 / No Comments