When it comes to equity, people who invest and people who trade are remarkably different. Their choices, investing goals and risk appetite differs significantly. But one thing is quite crucial for both – market trends – good knowledge of these can easily make or break anyone involved in these businesses. One has to learn investing and practice properly in order to achieve success and be financially free.
Here’s everything you need to know if you’re looking to understand market trends, their identification and how they can be used to your advantage.
Market Trends: An Overview
Stocks are always changing – they can move up, down, be stable, be quite volatile, move sideways, and more. When one tries to learn investing properly, they look at market trends, which allow them to figure out how these stocks behave. They also enable you to understand why this behaviour is caused, and how profits can be generated in order to be financially free.
Seasoned market veterans will vouch for the fact that crashes due to recessions or other economic factors can be very lucrative. Major indexes like the S&P 500 and the NIFTY 50 usually stabilise and revert to normalcy within a year or so – one has to learn investing properly in order to assess the risk and buy really low, since this can turn out very well in the long run. Such good practices can enable one to be financially free in a simpler manner.
When it comes to these market trends, there are three kinds that people usually keep an eye out for:
Short-term: These trends usually last for a few hours, and allow individuals like active traders to make quick, smaller profits – these quick incentives are small steps to be financially free.
Medium-term: These last a few weeks or months, and allow for strategic trading practices which are based on changes in economics, policies, etc.
Long-term: These can span for months or even years – they reflect major changes like economic cycles and industry shifts, and earning from them requires one to learn investing with a lot of patience.
Identifying Market Trends
Now that we’ve covered the different types of market trends, it is now time to understand how you can identify them in the stock market. When you aim to learn investing, it is important to know the different methods of doing so. There are two ways to do this – technical analysis and fundamental analysis – these simple ways can help you be financially free in the long run.
Technical Analysis: In this method, one has to rely on historical information, volume data, and more in order to predict future movements. This could include tools such as charts, trendlines, and other technical indicators like RSI, moving averages and more. However, they can be slightly unreliable, depending on their source. They do serve as an important part of the research, but should be accompanied by something more – this is important to know when you learn investing.
Fundamental Analysis: This method focuses on more non-numerical aspects, like an organisation’s financial health, outlook towards the industry, and analysing its overall competitive landscape, in order to figure out its potential in the long term. This approach may not enable one to identify trends directly, but helps in assessing their sustainability, thereby providing better medium-term and long-term viability of an investment. This, combined with technical analysis, leads to better decision making that enables one to be financially free in a more efficient manner.
Some Things to Consider
While trends are great indicators to identify while one decides to learn investing, there are many important things that have to be taken into consideration. Here are a few of them.
- Trends do not guarantee successful earnings – just because a trend worked in the past, does not mean it would behave the same way in the future. The strongest of trends can be derailed by sudden events, unexpected news and occurrences, and even changes in market conditions and sentiments. It is important to keep your investments diverse in order to be financially free.
- Never be overconfident – while certain trends may have had long-term stability, that does not mean that they will last forever. Always have a backup plan at hand and be ready to adapt.
- Technical analysis alone should not be relied upon as indicators – make sure there is a good amount of fundamental analysis as well.
- Don’t make emotionally-driven impulsive decisions – they can cloud your judgement.
Be Financially Free with StockGro
Now that you’re aware of how market trends work, you’re all set to start the trading journey towards financial freedom. With StockGro’s Financial Independence Calculator, you can figure out the amount per month you need to invest in order to be financially free in the long term. So, why the wait? Learn investing the right way with us, today!
