Identifying and Profiting from Market Trends
Basics of Identifying Market Trends
When entering the world of financial investing – including day trading – your first step must be to have at least a basic understanding of financial instruments and then formulate a strategy that addresses your own personal investment goals. These goals can be for short-term turnaround of buy and sell orders or you may be looking for long-term investments that you intend to buy and hold for months or years.
Market trends similarly come in several categories as discussed by Investopedia: short-term, intermediate, and long term. Long-term trends can have duration of years or even decades. Within long-term trends are likely to be a series of multiple intermediate trends that may result in upswings or downturns in not only particular financial vehicles, but for the market in general. Short-term trends are often related to specific conditions related to a specific stock such as:
- Lower than anticipated earnings results for a given company stock
- Global economic conditions that impact the market in general
- Change in supply or demand for a product or service that impacts value
- Political or civil turmoil that impacts business operations or availability of resources
- Devalued or appreciating currency values
There are other scenarios that impact the value of your investments and there are tools available to help you detect them and react to benefit as trends evolve. Through the use of sophisticated analytics and even simple trend analysis you can make a profit whether the trend is up or down.
Identifying Market Trends and Making a Profit from them
Making a profit from these market trends relies on the trader’s ability to detect them at the right time and the amount of time they take to react with the appropriate buy or sell orders to their brokers. Day traders don’t have to be financial experts to profit from market trends. There are several distinct indicators that provide insight to market trends and reveal when the timing is right to move. Remember that no one can predict with certainty the exact point when a particular investment or stock will either peak or reach bottom. Your best position is to recognize when those points are reasonably close to that point and execute the buy or sell options when they are to your financial advantage. Key indicators you can use without significant analysis or investigation include:
- Monitor the stock in question for the point where the 52-week average begins to decline regardless of growth in the overall market index. This will present a fairly accurate prediction that buyers are lagging in interest or optimism that the stock will continue an upward trend and are moving to other vehicles.
- Another method traders find reliable is to evaluate when a leading exchange such as the NYSE shows signs of a bull market trend. This can be determined by circumstances where advances in value outnumber declines even while knowledgeable resources such as the Dow and S&P are positive. This is a flag to investors that markets are less than stable and that a peak has been reached or is at least in sight.
- Swing lows are points where an index falls below any other point over a specific period in time. Repeated swing lows are indicative of a downward trend.
Tradingsim.com provides insight into more complex analytical methods of charting stocks to indicate not only the best point to buy but also for identifying the optimum time to get out of that stock. Among guiding principles presented by experienced day traders are these guidelines:
- Get started early in the day – this gives you a view of the pre-market activity that will potentially influence markets for the business day.
- Look for volume – trades of low value and low volume are not likely to produce the profits that match your trading goals
- Social media and current news articles – these media outlets have a way of influencing market trends at least in the short term
- Experience – regardless of how many articles you read or charts you utilize the end result is that only you know what strategy works best for your investment goals. As you gain in experience and knowledge your successes and failures will help you fine-tune that strategy.
Remember that no indicators are foolproof or totally consistent. Considering multiple factors to formulate an overall view of market volatility can be your best method of evaluating conditions that will influence your buy and sell decisions.
Bottom Line on Market Trends
Trends are inevitable. Whether you trade in stocks, bonds, commodities, or currency exchanges your investment gain or loss potential is part of engaging in day trading or long-term investments. Besides making a profit from your trading you need to maintain the goal of understanding market trends to take full advantage of all indicators available to you.
SureTrader is a leading online broker that provides the tools investors need to detect shifts in market trends and the ability to react swiftly to take advantage of financial opportunities. Utilization of SureTrader’s sophisticated technology permits day traders to make quick decisions and act on them when the time is right. SureTrader brings a competitive advantage to traders in multiple ways:
- Access to real-time stock tickers and news sources
- Analytical tools to detect changes in market trends to avoid potential losses and seize opportunities for gains
- Desktop and mobile access to SureTrader services – smartphone access is provided for both iOS and Android platforms
- Availability 24×7 to execute trades after hours or in pre-market activity
- Support – friendly and courteous support is available for SureTrader client personal assistance whenever you need us
Contact SureTrader right away to get started doing online trading with the best in online brokers.
Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.