Market Trends - Understanding
Why the Market Moves
It's no secret that the
financial stability of the global markets has been a little
chaotic lately. Credit card companies, over-ambitious banks,
and underhanded real estate brokers have all had their part to
play in the recent economic crisis, and if the upheaval has
left you a little skeptical of the stock market, you should
know that you're not alone. It's important for all investors to
remain cautious yet optimistic when it comes to investing in
the future. Understanding market trends and the way that they
can impact your portfolio is a great way to make sure you're
prepared for the future.
Understanding market trends
starts with a thorough understanding of the different factors
that can impact the value of stock in any given industry. One
of the most significant driving forces in the stock market
today is purchasing power. This means that every day consumers
have the most say in whether a stock's value is going to go up
or down, and they exert this power simply by choosing to buy
the products of one company over another. If more people choose
Construction Company A over Construction Company B, the value
of Company A's stock is going to increase, while the opposite
will happen to Company B.
Many experienced traders will
tell you that it's never a smart idea to trade against the
market trends, which means that you're going to have to develop
the ability to determine which way the market is trending at
any certain period of time. You might think that it's only
worth your time to pay attention to the trends in your
particular industry, or even the stocks that you own yourself,
but this could be a dangerous omission. Generally, the market
moves in one direction or another as a whole entity, so paying
attention to overall trends will give you a good idea of how
your stocks are likely to behave.
There are three main types of
market trends, the uptrend, the down trend, and the sideways
trend, and each can occur over a short, intermediate, or long
period of time. You can spot an uptrend by looking for
successive trading days that close with higher low prices than
the day before. This can also be extended to trading over weeks
or months. A down trend is typified by successive trading days
that close with lower high prices than the day before. Sideways
trends will demonstrate highs and lows within a relatively
narrow range for successive days.
| 
