Previously, in my old article, I have stated that the stock market trading is all about the trends. And recently, in Stock Market’s Cycles article, I mentioned how important the stock market (as well as economy) cycles are. So, in here, we have two the most important things to be known as stocks trader (as well as stocks investor) which are Stock Market Trend and Stock Market Cycle.
You may think that the stock market trend and cycle are two different entities but you are wrong. The Stock Market trend and cycle have a very close relationship. In short, Stocks Market trend is a tool to detect the current Stocks Market cycle. In my opinion, that’s why many said that Stocks Trading is all about the trends and we should never oppose the trends. Therefore this time, let’s take a deeper look into Stocks Market trend.
As you might already know, Stock Market Trend is perfectly described by Charles Dow via his Dow Theory. If summarize, the Dow Theory tells us that there are three trends available which are Uptrend (bullish), Downtrend (Bearish), and Sideaways (Nontrend).
Stock Market Trend, The three of them
- Uptrend (bullish) is happened when everyone (the stocks traders/investors) think that it is the best time to buy the stocks (since the fundamental condition is in good shape) so the price tends to up in long-term.
- Downtrend (bearish) is happened when everyone (the stocks traders/investors) think that it is the time to sell the stocks (since fundamental condition is in bad shape) so the price tends to down in long-term.
- Sideaways (Nontrend) is happened when everyone (the stocks traders/investors) is confuse about the market situation. This trend usually happened after a long downtrend and a long uptrend in where people cannot predict whether the trend will continue or reverse.
From description above, it is obvious that the best time to buy the stocks is when the stocks market is in uptrend (bullish). In contrary, the best time to sell the stocks is when the stocks market is in down trend (bearish). When the stocks market is in sideaways, I suggest to avoid the market since the uncertainty is too high – except you have enough resources to predict the next move of the market.
Now, let’s see how we can tell the trends is the uptrend (bullish), downtrend (bearish), or sideaways (nontrend). In my opinion, the most simple way to detect the current stocks market trends is by looking at its high and low price in certain time range. If the high and low price is higher from time to time, the market is in uptrend (bullish). In contrary, if the high and low price is lower from time to time, the market is in downtrend (bearish).
The market is in sideaways if the high and low price is at the same level from time to time. We will discuss deeper about how to detect the current stocks market’s trends in the next article so just stay tune in this Stock Market Tips blog.
Have a great stocks trading day by utilizing the stock market trend everyone!