Several people view stock market trading as a door to earn easy money. This is not true. Only people with a good luck could have profits if it was that easy. People involved in trading stock have do some research to make profit. Identifying the trends of the market is the key to success in stock market. If you are able to identify the trends in stock market trading, you can understand the behavior of a stock based on its past performance.
One of the basic assumptions of stock marketing companies is that the market has trends: primary, secondary (short term) and secular trends (longterm). Based on these trends, market watchers predict the value of shares. Traders use the trends to identify profit or loss.
Stock market can be a bull market or a bear market. A bull market indicates the presence of more buyers than sellers. This leads to increase in the value of shares. On the contrary, if the number of sellers is more than the number of buyers, the value of shares falls. It is said to be a bear market.
To identify a trend, you need to have information on two important factors of the stock market trading: price and volume. The price tells you about the direction of movement in the market and the volume tells whether there is movement in the stock market. There are cases when the volume of a stock is high and so is its price. This indicates an upward trend. In case of high volume and low price, it is a downward trend. Based on this, you may decide whether to sell or purchase stocks.
If you see regular downward days, the market is indicating a stall or upturn. It is wise to invest in stocks as prices are bound to jump back. Alternatively, if it has been a continuous period of high prices, the market is indicating lower prices in future. It is right time to exit from the stock.
Often, it happens that the stock prices are increasing or decreasing. This may look like a change to you. However, if you compare the volume and find that there is not considerable volume increase or decrease, you should not expect change in the stock market yet. While studying trends is a good habit in stock market trading, it is necessary to watch out for false signals.
Stocks, which are high in volume, for example mutual funds, tend to affect the movement of market. You can watch out for movement in such stocks to identify possible changes. Several online trading companies provide charts and trend indicators on their websites. These tools can be used to study the trends in stock market trading.