Market Trend
Stock Market is of highly volatile nature and we often notice ups and downs at stocks price charts on daily basis. To some extent market trend is responsible for these movements in stocks prices. Understanding market trend is very much important to perform quality technical analysis. In general term market trend is broad upward or downward movement in a stocks price over a period of time. As we know Stock prices can be volatile and does not necessarily follows a straight line by zooming price chart a defined market trend can be identified. Discount brokers offers such necessary details about market trend, price charts and more on their trading platform itself.
Three major types of market trends are discussed below :
1) Uptrend
When market is following upward trend then at that time both tops and bottoms of a stock chart keeps on increasing. Everyday stock price touches a new high and falls lower than it did on the earlier day. Do not frame a misconception that it is stocks lifetime high, it may be the highest it had touched in past few days. This continuous rise in tops and bottoms indicates that positive sentiment is prevailing in the market. When market is following upward trend then it is expected that price of stock will appreciate and hence more traders buys it which leads to further increase in its price.
2) Downtrend
When stock price if falling continuously under such condition market follows a downward trend. Both tops and bottoms of a stock chart keeps on decreasing. Investors are convinced that stock price will fall more and therefore with every little increase in its price they sell it. No further buying in such stocks takes place. Ideally traders should avoid to buy stocks whose price is falling if they are short term traders.
3) Sideways trend
This trend is a bit difficult to identify and understand as stock price does not move notable in any of the direction over a period of time. Both bottoms and tops remain at constant level and there is no significant movement which can help to decide whether it is a good time to buy stock or not.
Having a good understanding of market trend is important because it tells about necessary details of a stock like whether its price will rise or fall, how much risk is involved, when is the good time to buy or sell a stock and more. As if in-case you sell a stock before it touches its maximum high you may earn loss. It is always suggested to first learn about market and its terminologies before you began to trade here.
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