PostHeaderIcon What is a Stock Market Trend?

If you are already an investor in the stock market, you know pretty well that the market is often in a state of flux. The stock market goes up and down due to a number of factors. For one, the changes in the market is due partly to the value of the company that owns the stock. The better the standing of the company, the higher people consider its value, thus people are more likely to buy their stocks.

Another factor that affects the market is interest rates. Interest rates refer to the money that you need to pay a bank when you take a loan or the amount you get from a bank for your money deposits. In the stock market the natural flow is: the higher the interest rates, the lower the stock prices become. If interest rates are high, people are not likely to take risks in stocks because they feel their money can earn decent enough if they deposited them in banks.

Analyzing for trends in the stock market is never easy but through technical analysis predicting the movement of stocks can be computed with comprehensive results.

Often stock market trends are classified as primary trends, secondary or short-term trends, and secular or long-term trends. Stock traders often describe market trades as when bulls which are the buyers in the market outnumber the bears or sellers, or vice versa.

There are two kinds of primary trends, the bull market trend and the bear market trend. When stock traders say a bull market trend, the market is showing an increase in investor confidence. This motivates investors to buy more stocks because they anticipate capital gains.

Meanwhile, a bear market trend refers to a market that has widespread pessimism. In these times, investors are anticipating further losses that’s why they are more likely to sell their stocks. This is exactly what happened during the start of the Great Depression of 1930s. However, keep in mind that a bear market is more of a sharp and major drop in the prices and not a small one. Some use a 20% or more decline in a key stock market index as as indicator that the market has entered a bear market trend.

As opposed to the primary market trends, a secondary trend is a temporary change in price that occurs within a primary trend and lasts from weeks to a few months. These temporary changes include a correction found in a bull market trend while a bull market rally is found in a bear market situation is called a bull market rally.

And finally, one can’t ignore a secular market trend. This market treads as mentioned earlier secular market trends are longer even lasting from 5 to 25 years.


Leave a Reply