Understanding stock market trends can make your job of earning money in the market much simpler. In contrast, if you know little or nothing about these trends can cause serious loss.
As you dig deeper into the market and learn more aboutthe way it functions, you will begin to hear certain terms about marketingtrends that seem to be repeated over and over again.
Market trends are variable and volatile, both on adaily basis and over extended periods of time.
In the past, for example, the United States has haddevastating stock market crashes, but due to the freedom of a capitalistsociety, the American economy has always eventually rebound.
What does it mean for the market or a particular stockto rebound? Assuming that the value of a company or its stock has plummeted toa level that seem unrecoverable, leaving it practically worthless, it may feelas though that company is in danger of bankruptcy and falling off the scope of thefree trade markets altogether. All of a sudden, however, the founder of that companymay introduce a new product over which consumers go wild. Everyone wants one, andthis product may be in short supply upon its introduction, causing a race tothe department store shelves.
When such a move occurs, the law of supply and demandwill take over, making the company valuable once again. The stock price forthat company’s shares will recover, and the resulting gain in value would beconsidered a rebound – a return to the original status (or better) prior to thedevastating loss.
The market trends either up or down, and there arespecific references to strong changes in the market values that you mayfrequently hear. If several different areas of the market are in a steepdownward slide, with values dropping rapidly (perhaps even ten or twentypercent in a few days), it is referred to as a bear market.
You can rememberthis reference as though you are in the extremely dangerous position of beingchased by a bear – if you are in possession of several stocks or othercommodities worth a goodly sum, you have a serious chance of losing a greatdeal of value that could translate to a loss of net worth should you choose tosell, and it can be a similar, very dangerous situation.
Your best bet in these cases is to either sell beforeprices drop below your original purchase price or to hold onto the shares untilthe market rebounds. However, when the bear market reaches a low point, it canbe an ideal time to get into the game, as it is rare for prices to drop belowthis point. Then, if you patiently await the recovery or rebound of the market,you can make a great deal of money from a bear market. These options will bediscussed in more depth in later article.
At the same time, a bull market is a strong generalupward trend for many stocks. You might compare this to the running of thebulls in Pamplona, Spain, every year. You are safer if you are indoors when therunning occurs, and by the same token, if you own stock during a bull market,you are in a prime position to increase your net worth and sell your shares,making a great deal of money. This is another idea will be further explored ingreater detail further on in this article
To be continue..............