Stock Market Trends

My quest for knowledge has led me to the belief that I can determine which direction the stock market is heading over time if I learn to use the price and volume data together with good old fashioned common sense. When I put them together during analysis, I can figure out whether there are more buyers or sellers in the market. The volume tells me that there is movement and the price lets me know the direction of the movement.

A high volume day along with an increase in price for the stock market tells me the market is in an up trend most likely caused by institutional investors or another one of the big boys. On the flip side, higher volume lower price days tell me the market is in a down trend.

Now here is where common sense comes in. Sometimes the market sends false signals when it incurs sharp price movements with no real volume movement. Your common sense should tell you to keep an eye out for a change in market direction.

Keep in mind that not all stocks follow the trend of the overall market. An uptrend occurs when a stock experiences a string of higher highs and higher lows versus a down trend which results from a series of lower highs and lower lows. As a rule, stocks trend about 30% of the time and move sideways the rest of the time.

I look at trends as unpredictable as the only thing constant about the market is change. I try to use trends in conjunction with other information in an effort to minimize my risks and hopefully get one step closer to achieving financial freedom.

Remember that unless you personally understand the risks of the investment don’t make emotional or rash trading decisions and risk losing your money.

I hope this article helps you along your journey.