How to Analyse Stock Market Trends?-MahadevanShareSense
Need to understand the stock market trends? First, you need to understand how the market functions. A trend is nothing but the direction in which the stocks are heading, i.e. either its worth is increasing or decreasing. It is known as an upward trend or a downward trend. The longer a trend moves in a direction (either upward or downward), the more significant the trend becomes.
Stock market analysis is very important so as to earn maximum profits by taking smart and quick decisions. The stock market trend analysis is simply a process in which we analyze the current trends so that we can predict the future trends. Nobody can predict a share market trend with a 100% guarantee but it can be predicted if a particular market sector would continue to grow or not in the near future.
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Based on the data from the past, we predict the future movement of the stocks. There are basically three main types of stock market trends:
- Short-term market trend
- Intermediate-term market trend
- Long-term market trend
One needs to move with the trends to earn profits. It is rightly said that the stock market trend analysis is like a bull run, one can ride the bull until the trend is reversed. So, investors don’t move against the stock market trends as it can lead to huge losses.
Importance of the Stock Market Trend Analysis
There is a lot of data involved in the process of analyzing the trends that are ongoing in the market. You need to choose a particular sector for which you want to start analyzing the trends. Now, there are both external as well as internal factors that affect the ongoing trends, i.e. the changes in the sector or industry you choose as well as the latest governmental rules and regulations for the same. Both these factors have a huge impact on the market. This data is helpful in providing the information that if the trend would be an uptrend or a downtrend in the future. So, for investors, it is advisable to go with the trends rather than going against them because it is a one-way route that you’re walking on and there might be consequences if you choose the wrong direction.
Here are some points you should keep in mind while analyzing the stock market trends:
Direction of Trend
The trends basically are capable of moving in three directions, i.e. upward, downward, or sideways. All three trends can be observed in a single chart if you have been studying the charts for a longer period of time. So, for a better analysis of the stock market trends, keep a close watch on the direction of trends.
There must be at least three or more data points of contact on the chart for the validation of a trend. So, while analyzing, look for more data points in the charts.
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Keep an eye on the slope
Watch the slope as it is a clear indication of the rise or fall of price in the market trends every day. Look for the steep lines as they indicate either an upward trend or a downward trend. If you see lat lines in the charts, the validation of the trend is questionable and so are its predictive powers.
The trend must be timed
The validity of a trend is determined by the amount of time, i.e. there is more importance of monthly time series rather than just the weekly or daily prices. So, watch out for the trends that are timed properly.
The duration of a trend is directly proportional to its weight. The longer is the duration of the stock market trend, the more are the numbers of profits provided by it.
These are some basic points you must jot down and apply while analyzing the stock market trends. Stock market analysis needs time and experience to master. So take your time and go ahead in the process. Happy Trading!!