Stock Market Trends and Signs
In order to become a successful stock market investor you should be able to identify the different signals the market gives you. Therefore, you should train your senses in order to become capable of reading the signs the market gives about its future direction.
The market is characterized by different trends. Some stocks tend to go simultaneously with the movements of the market, whereas other stocks follow their own direction.
Thus, in order to make successful investment decisions you should be become well aware of the different trends of the market and their effect on your future returns.
Two important factors may greatly facilitate reading the future direction of the market. They are:
- Price - identifies the direction of the market
- Volume - identifies whether there is a movement on the market
When you study these factors together you will be able to determine the number of both buyers and sellers that are currently playing on the stock market.
Price Indicators
The factors that show price movement are:
- The Dow
- S&P 500
- The NASDAQ
These indicators are used most for the purpose of determining the current trend of the market and whether this trend will continue in the future or go in an opposite direction.
Volume Indicators
In order to determine the second factor, that is volume, you should check the daily sales volume.
Both the price indicators and the volume indicators can be checked online through the use of many sources.
Up Market
Up markets are characterized by increased prices and high volume of sales. The increased prices are identified by increased values of one of the mentioned above indexes or more than one of them.
If such conditions are observed, then there may be an increased buying activity of mutual funds and institutional investors.
Down Market
Down markets are characterized by low prices and high volume of trade execution. If such conditions are observed, then market players are withdrawing their money from the market.
When you study these price and volume indicators, you should be aware that they may be misleading. This is so, since there may be several days during which both high prices and volumes are observed, but still the next time period may be marked by high volume and falling prices. This situation is generally referred to as profit taking.
Another scenario is also possible. For example, a market may experience downs during several consecutive days, while its general trend was up. In such a case, this may mean that the time has come when the market will reverse its direction.
The groups that have the biggest influence on the direction of stock prices are mutual funds and institutional investors, because their main emphasis is on volume. So, an examination of the trading activities of these may determine the future direction of the stock market.
The stock market hides another trap. It may experience a drastic change in prices which is not corresponded to a change in volume. However, the general forces that move the market are supply and demand and thus, an up market is characterized by more buyers than sellers, who are bidding against one another and drive both prices and volume up. Accordingly, a down market is characterized by fewer buyers than sellers, who are competing to win buyers by lowering their prices. Since prices are lower, then volume is higher.
Finally, you should become observant of the market trends by studying the signs it sends to you. In this way you will increase your chances of acting in the appropriate for the market conditions way and as a result increase your profits.
Opening a OptionsHouse account to benefit from their low $3.95 stock trades (currently they offer 100 free trades) is a smart idea.
Rate this article : Low | High |
- Securities and Exchange Commission Complaint Procedures
- Telecommunications Technology Securities’ Fraud Alert
- Taking Note of Broker Discussions
- How to Obtain Corporate Reports
- Convertible Securities’ Risks to Common Stock Holders
- Choosing an Investment Professional
- Rebalancing Your Assets
- Tips for Variable Annuity Investors
- Investors Beware of Government Impersonators
- Options on Securing Your Securities
- Funds of Hedge Funds
- Investing in Hedge Funds: Pros and Cons
- Investor Alert: How to Avoid Investment Fraud
- What Happens When a Public Company Goes Private
- The Pros and Cons of Exchange-Traded Funds
- Investing in Equity-Indexed Annuities Explained
- What Are Promissory Notes and How to Avoid Promissory Note Fraud
- Investor Information: Finding Legal Help when in Dispute
- Dispute Resolution for Investors
- What Investors Need to Know about After-Hours Trading
- Tips for Researching Investments: Uncovering Analyst Conflicts of Interest
- Stock Analyst Recommendations - Should We Trust Them?
- Bank Demutualization - Frauds to Watch Out For
- Lost or Stolen Stock Certificate?
- Online Trading - Issues and Solutions
- Advice on Trading In Fast-Moving Markets
- How to Transfer Your Brokerage Account Smoothly
- Things to Consider When Opening a Brokerage Account
- Ex-Dividend Date - Why It Matters
- Investment Opportunities in Times of Financial Crisis
- Insider Trading Tracking
- Invest in Utility Stocks during Recession
- Why Price/Cash Flow is Important?
- Profit from Dividend Paying Stocks
- Simple Stock Selection Tips
- Year End Tax Planning and Portfolio Considerations
- Market Leaders and Stock Investing
- How to Select a Winning Company
- When to Apply Averaging Down
- Down Market and Discounted Stock Opportunities
- Stock Attachment Can Blur Our Judgment
- Buy Low - Sell High, Buy High - Sell Higher
- How to Select a Winning Stock from a 52-Week List
- Stock Market Trends and Signs
- Tips on Winning Stock Picks
- Government Deficit and Stock Investors
- Stock Price Forecast
- Speculative Derivatives Expiration
- Shunning Emotions from Stock Investing
- Constructing a Successful Stock Purchase Plan
- Economic Fundamentals Importance
- Positive Predictions on Interest Rates Move the Market
- Iran Events Might Influence the Stock Market
- Stock Market Movements
- Long-Term Stock Investing Advantages
- Take Emotions out of Stock Investment Decisions
- Market Timing Hidden Traps
- The Best Investment Style for Your Financial Objectives
- Dollar Cost Averaging Benefits
- Long-Term Rewards of Stock Investing
- Business Fundamentals vs Management Quality
- Tax Refund Investment Solutions
- Deep Debt Considerations
- Tangible Goals Motivate Investing
- Longevity Risk and Retirement Plans
- Has the Time for Selling Stocks Come
- Stock Tax Implications
- The Warren Buffett Way - Principals for Successful Investment
- Warren Buffet - Investing with Intelligence and Patience
- DRP Types and Benefits
- Avoiding Bad Stock
- High Risk, High Return
- Purchasing Your Company’s Stock
- Stock Portfolio Diversification
- Per-Share Price vs Market Cap
- Non-Financial Characteristics of a Successful Stock
- Institutional Investors and Their Influence on Stock Trading
- How to Benefit from Short Sellers
- When to Sell a Stock
- Assessment of Risk Tolerance
- Investment Risk Tolerance Level
- Investment Risk Types and Advices
- Bull and Bear Market Strategies
- Minimize Your Stock Losses
- Types of Stock Market Losses
- Stock Protection Options while You are Away
- Avoiding Stock Market Fraud and Scams
- Before You Buy Stocks
- When to Buy and Sell Stocks
- Stock Trader vs Company Investor
- Stock Diversification Tips
- Stock Buyback Benefits to Shareholders
- Stocks and Inflation Rate
- Allocating for Investing Purposes
- Stock Market Returns Pitfalls
- How to Avoid Pump and Dump Scams
- Tools and Researches Offered by the Best Online Stock Trading Sites
- Traditional IRA and Roth IRA Tax Benefits
- The Long-Term Scope of Stocks