Accurately Identifying and Monitoring Stock Market Trends

To become financially successful stock market investing, there are absolutely two things that you must get correct: you must be able to correctly identify both the timing and trends of the market.

Trends show how the stock market or certain aspects of it perform over time. Timing relies largely on the investor’s intuition and ability to interpret economic indicators to determine when is the right time to buy or sell stock.

In general, the more experienced and knowledgeable an investor is, the better he is likely to be at each – these are key to maximizing your investment opportunities.

Trends of the Stock Market

The market trend refers to long term increase or decrease of the overall price of a company’s stock during the course of months or even years.

When you consider the overall movement of prices over this extended period of time and extrapolate general information about the performance of the stock, you are identifying its trend.

The downward sloping movement of the market is known as a “bear market,” while “bull market” is referenced to describe the stock market when prices move upward.

Influences on Price Fluctuation

Supply and demand are the two greatest determinants to product prices. High demand with a restricted supply will result in a rising price. But when the opposite occurs – demand is low and supply is high – prices fall.

Supply and demand of specific products or resources fluctuate over time, leading to changes in investment behavior.

For example, a worldwide oil crisis could drive up oil prices around the world. Such an increased demand for oil around the world would drive up the price of oil. Shareholders who have invested in oil-related stocks would then likely profit from because the price of the stock would almost surely rise.

Additional Factors

External factors that can impact (positively or negatively) the trend of stock market performance include seemingly unrelated life events such as natural disasters, security threats, wars, Presidential announcements, Congressional decisions, unemployment statistics – as well as a host of other more obvious (and directly correlated) economic factors.

Of course, influences that affect the state of the economy are extremely variable and unpredictable. For instance the terrorist attack in New York on September 11th, the collapse of the housing market, and even natural disasters like the BP oil spill can all make for “nervous” investment decisions.

Timing

Learning when the right time to buy, sell, or hold onto a stock is probably the best skill you can hope to develop as an investor. You cannot make money if you do not know when to take action with your stocks for maximizing your profits.

Investors use a variety of strategies to determine when the timing is right, but the basics include paying close attention to market swings and the economy in general. (Some claim that a monkey throwing darts at a “buy” and “sell” target will be just as accurate as investors and economists, but savvy investing strategies CAN be learned.)

Evaluate current and past performance of the stocks you have, and use past trends to help predict future price movements. Then make the tough “buy,” “sell,” or “hold” decisions.