29th September 2020
Finance

Understanding Trends In The Stock Market

The share market has off late become the topic of discussion, especially in India. Long-term investors, short-term traders and of course the speculators who enjoy the thrill that the stock market offers, all of them are a part of the trading cycle. But before dipping your toes in the market, it is always better to understand how the stock market works. The market undergoes daily fluctuation, which is the subject that most interests everyone. And behind all these daily fluctuations aremarket trends, which can be detected over a substantial stretch of time. As an investor, you need to pay attention to the price patterns and come up with an opinion about market trends, before deciding on your course of action.

What is Stock Market Trends?

A trend can be defined as the general direction in which the stock is moving in the share market. The market can either be Bullish or Bearish. Depending on this the stock market trends could either move upwards or downwards. But there is a specified period for a movement to be considered a market trend. Be it upwards or downwards, the longer the trend moves, the more significant it becomes. Many traders choose to trade in the same course as a trend, while some pursue to recognize reversals or trade against the trend. Uptrends and downtrends occur in all markets, such as stocks, bonds, and futures.

The ones who are familiar with the stock market and market trends may also have heard the term, trend analysis. What does it really mean? Stock market trend sanalysis can be defined as the process of studying and analyzing the current trends in order to predict future trends. With the help of stock market trends analysis, you can try and predict if a particular stock of your liking that you may contemplate investing in is growing and will continue to grow in the future. It may also come handy to check a market trend in one sector will start one in another sector. The process has been in use for a while and involves a lot of data to be analyzed. But remember, this process is not foolproof and nobody can predict the trends correctly with a 100% assurance. It is another aspect of technical analysis. Market trends are based on the concept that past movement is a clue to future trends.

Traders can recognize a trend utilizing different types of technical analysis, including trendlines, price action, and technical indicators.For instance, trendlines may show the course of a trend while the Relative Quality Record (RSI) is intended toshow the strength of a trend at any given point in time. Mentioned below are the three types of market trends.

An uptrend defines the price movement of a stock when the general direction of the stock is upward. In an uptrend, each consecutive peak and trough is higher than the one found in a previous trend. So it can be said that, the uptrend is therefore made up ofof higher swing lows and higher swing highs. Once the price begins making lower swing highs or lower swing lows, the uptrend is in a state of doubt or has become a downtrend.

A downtrend alludes to the price action of security that moves lower in price as it changes after some time. While the price may move sporadically sequential, downtrends are described by lower peaks and lower troughs after some time. Technical analysts focus on downtrends on the grounds that they speak to something more than just a losing streak. Securities in a downtrend appear to be bound to keep slanting lower until somemarket condition changes,inferring that adowntrend indicates a deeply worsening state.

In a sideways trend, the stock does notshow any notable movement in either direction during a prolonged period. Peaks and troughs remain to be constant and there is no noteworthy move to decide whether to buy or sell a stock or not.

Understanding market trends is an important part of trading. It is a mighty technical tool that will help you get positive results and allow you to earn a generous profit.

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