The stock market can be very volatile from an upward swing to bottoming out within any given day. It’s very hard to be able to predict what will happen. Analysts attempt to study market trends to try to determine what the market is likely to do in the near future. We’ll look at market trends and what they can tell you about the market condition.
Because stocks can fluctuate drastically from day to day, called spikes, it’s important to look at trends over the long term. When you study a chart, you can see whether the stock is rising or falling over the long term. The time frame of trends can give you a good idea of how long you need to keep your investment. As an example, if a particular stock has an uptrend over a five year period of time, then you’ll want to keep your investment in that stock for an additional five years, at least. You might begin to panic if the market takes a big nose dive, but try to remember that the stock has a history of an uptrend over the five year period, even though it has fluctuated with the market on a daily basis before.
If you are worried about a down-trend in the market, there are several things to keep in mind. If you look at the stock market over history, there is a postive trend. Even after a drastic down-trend as in the Great Depression, the market returned to the same or higher levels than before the decline began. There’s also an opportunity to gain from a market down-trend. You could sell your stocks at the current price and then repurchase them at the lower price, which will produce higher profits when the market returns to its normal state.
It’s important for investors to understand and track market trends. When you understand market trends, you are less likely to panic, which means you are less likely to make errors in judgment when it comes time to buy and sell your stock.