What is a stock market trend?



When a market price sustains itself for a certain period of time, it is called a market trend. The terms bull market and bear market indicate the upward and downward movement of price. While the term bulls market indicates optimism in the market, bears indicate pessimism. Bulls and bears can rule either the whole market or some specific sectors or securities. The occurrence of market trends can be explained by the following example.

Have you watched closely how a boxer behaves in the ring? He often jabs with his left hand at his opponent so as to force him to try dodging away to the left side. He then suddenly pounces upon him with a big right hand punch, which takes his opponent off-guard and sends him hurtling down to the ground.

We have another popular analogy too: coming events cast their shadows before. Although stock market is known for its most typical trait that characterizes it-- unpredictability, yet those who have some experience with it do get inkling about the imminent change in its behavior, its mercurial character notwithstanding.

Most, though not all stocks, do move with the overall market trends?whether downwards or upwards. They send some signals about the direction that they are likely to take if only you pay close attention to them. Their one-day bumps, if any, have to be ignored.

It, therefore, always pays to keep a watch over the general stock market trends and what signals they send about its future behavior.

There are two important indicators of stock market trends, price and volume. When you combine these two factors together, you can get a fairly good idea of the over all scenario that may unfold. They may tell you whether there are more buyers or sellers in the market.

While the volume tells you whether there is any movement in the market, the price indicates the direction it is heading. There are three other market indicators, the Dow, the S&P and the NASDAQ. They together provide information on the price. They tell whether the market is going to continue with its present trend or trying to take an turn.

The other indicator, the volume, can be known from the daily sales. Information about both these indicators can be easily found online from several finance sites such as Yahoo! Finance. If the market has high volume sales with lower prices on a particular day, it would obviously mean a downward trend indicating that the big players are backing out of the market. If the market is going up and you begin to frequently see down days, it may indicate that it's about to reverse its course or just stall.

It is quite a common knowledge that the volume sellers and buyers that really impact the market are the mutual funds and institutional investors. The market goes in the direction that they take. This becomes visible in form of change in price and volume figures.

If you find the market is showing the price movement in a particular direction without the corresponding increase in volume, it may mean that it is sending false messages and you should be doubly careful before investing in it. It is quite well known that the driving forces of the market are the demand and supply, except when some really extraordinary event occurs.

When there are more buyers-- meaning there are higher prices on higher volume?than sellers, the market is trending up. On the contrary, there are more sellers ?lower prices on higher volume?the market is trending down.

You have to be careful for the signs that show the changes in the market. If price and volume are different from the prevailing trend happens frequently, you have to be prepared for the change.

Reading the market on day-to-day basis may not always be helpful, but you must watch out for the general direction of the market and try to spot the warning signs that a change is coming.

Apart from the price and volume trends, there are certain other ways of looking at the market trends.

They can be classified in three categories, primary, secondary ?short term?and secular or long-term trends. This belief is based upon the practice of technical analysis, which may, at times, be inconsistent with the standard academic view of the financial market. When we do the technical analysis we assume that the stock prices move with the market trends.

Yet another theory is that the market prices go the cavalier way. They just move in a random manner. The past trends are only a collection of random movements.