Stock Market Trend Analysis

Trend Analysis Is Your Friend

Have you ever heard of the term the “trend is your friend”? If so then you’re more than likely know of the importance of a trending market. When professional traders enter the market they will want to know if it’s a trending or ranging market. This is important for many reasons and it’s the bedrock for many successful traders. After all if you’re going to invest your hard earned cash you’ll want to know what the odds are of making a profit.

Time Is Your Enemy
All too often we see novice traders who enter the market with dreams of making it rich only to end up wasting years of their life with nothing to show for it. We can’t say it often enough, stock market trend analysis is the most important part of being a successful trader, if you don’t have a grasp of this basic fundamental then the odds of making money is pretty slim.

Do Stock Pickers Work?
When a trader first starts to trade, he or she will go with recommendations. You may have seen the many sites which have sprung up over the last decade or so which claim to be able to pick winning stocks. Some of these programs and stock pickers are quite good but they don’t work by themselves, the user at the other end will need to do their own research too.

What Affects Your Stock Pick?
When looking into a stock to purchase its not only important to look into the overall condition of the market but to look at the stock market trend history of the shares you’re about to buy. If you don’t do this then you’ll more than likely miss that important entry point.

For instance many stocks have a cyclical nature. They will go up in price at a certain time of the year every year due to outside influences which could be anything from the weather to mineral production for that year.

Upwards Trend & Downward Trend
So what we can learn from this is that some stocks may depend on what’s going on in the world as opposed to what the market is doing. It’s a kind of domino effect which can affect certain stocks so even if the market is trending up, you’ll need to look into your stocks own history before purchase just in case.

Trends in the stock market are important for all those reasons above, there can be an upward trend or a downward trend in the stock market and it’s important that you know how to tackle these situations when they strike.

You’ll need to know where your chosen stock sits and how to trade it even when market conditions seem to be better than ever, in short you need a plan which you’ll stick to no matter what happens.

Previous Years Trends
Usually stock market trend analysis is avoided by many newbie’s in the trading world because they see it as something far too complicated for them. The truth however is that it only takes a few days to get a good grasp at how it all works. If you are starting to make a move into the markets in 2012 then it would be a good idea to go over stock market trends for 2011.

You should not only look at the overall trends for the NASDAQ & the Dow but you will also need to take a look at the history of your chosen stock for the year before. One word of warning before you trades stocks; always make sure you know when a particular stocks earnings is due.

The reason for this is that even if the market is trending up, a stock could release dismal earnings and it will drop in price, so make sure you don’t trade a stock during its earnings unless your trading earnings specifically.

Did you find this article useful? Do you use stock market trend analysis when trading? Why not let our readers know about your experience by adding a comment below.