The investment market is often described as a space where opportunities and risks arise at every moment. Global growth is followed by periods of decline, and uncertainty breeds doubt. To avoid losing money, it is important to understand when the market is growing and when it is falling. We talk to experienced trader Artem Nikonov to understand the intricacies of market movements and learn how to distinguish growth from decline.
According to Nikonov, a falling market is not chaos at all, but rather a clear picture dominated by a few players:
“A falling market is usually a story about one, or less often two, heavyweights. They concentrate a significant portion of liquidity on themselves, while the rest of the assets are sideways or slowly declining.”
These heavyweights are large companies that are included in indices, ETFs, and even provide a significant portion of credit portfolios. Their movements set the tone for the entire market.
“The risk of margin calls arising in the absence of the possibility of injecting additional liquidity can trigger a chain reaction of margin calls, forming a sustained downward trend for a long period,” adds Artem.
Indeed, in a falling market, markets become apathetic and treacherous, and are not suitable for investors without the skills of averaging, cutting losses, and strategic re-entry. It is important to remember that when opening a short position, the risks are not limited to the size of the liquid portfolio.
“It’s obvious, but daily quotes also indicate that the market is falling. If it is growing, then it is the second or third tier, but by insignificant percentages. And if leading companies are growing, then, as a rule, all growth is recouped within a day, rarely two, and they continue their steady downward movement, collecting liquidity from adherents – “this is the bottom,” the expert characterizes.
A completely different picture emerges during periods of growth.
The main difference in a growing market is the spread of liquidity across the entire market. Growth is not limited to a couple of leaders: it occurs in sectors, within which favorites and outsiders can switch roles in a matter of hours.
“A growing market is primarily motivating, energetic, and contagious. It forgives mistakes and creates a narrative: you should have bought more,” Nikonov shares.
This scenario offers many opportunities for trading.
“Whatever you don’t buy grows, any idea yields a profit, which creates the illusion of expertise. This is a time when the appetites of newcomers grow, horizons open up, and people come for easy money, because the current rules of the market will always work. There is only one downside: everything breaks down, as always, at the most unexpected moment,” says Nikonov.
Quotes confirm the upward trend on a daily basis: the shares of leading companies are growing, and any dips that occur are usually quickly bought up by the market. The decline in prices is not developing — sales by those who are confident that “it won’t go any higher” are quickly absorbed by demand. High-quality second- and third-tier companies are actively adding value, while high-risk assets are capable of demonstrating multiple growth, creating a sense of endless growth and easy earnings among participants.
Nikonov emphasizes that both market conditions are merely phases of a larger cycle.
“Most inexperienced participants give up and leave the falling market with negative experiences, believing that there is no money there and that it is all fiction. But time will put everything back in its place, and most of them will return, thereby creating an opportunity to sell at a high price what was bought cheaply. And the circle is complete!” the investor states.
According to the expert, this is how the cycle of market dynamics closes. A decline is followed by a rise, and a rise invariably gives rise to a new wave of fear and profit-taking.
Conclusion:
- A falling market does not mean “no money” — it requires skill and strategy.
- A growing market brings profits, but can create an illusion of stability.
- True opportunities arise from the ability to observe, understand, and act, not just hope for luck.
“The market is a mechanism in which those who understand how it works win,” concludes Artem.
