Market trends refer to the general movement of an investment market. People involved with stock markets attempt to identify the current type of movement that is taking place as well as project how long the current movement or trend is likely to continue. Determining what type of investments to buy and sell is greatly influenced by accurately assessing and projecting trends.
The process of identifying market trends relies greatly on the concept of efficient market hypothesis. Essentially, this concept involves understanding that financial markets supply the building blocks required to decide on how to buy and sell, since it is possible to research the factors leading to the current market condition. By taking efficient market hypothesis into consideration, it is possible to understand how the market reached the current position, which factors are likely to consider shaping the market, and what could occur to change the current trend at some point in the future.
For the most part, investors and brokers tend to group trends into three categories. Primary trends are movements that apply to the majority of the stocks traded on the market or within a specific sector of the market. Generally, a primary trend will continue for at least a year and sometimes longer.
Secondary trends occur and reverse within a shorter time frame, often from a couple of weeks to a month or so. At the beginning of this type of trend, it may or may not be apparent if the current trend will peak and reverse in the short term or last long enough to be classified as a primary trend.
Secular market trends are not always differentiated from primary trends, but investors and brokers who accept the idea tend to identify it as a primary trend that has continued for a minimum of five years. It is not unheard of for a trend of this type to continue on for as long as 25 years.
Regardless of current market trends, it is possible to make investing decisions that create a reasonable return. The key is to identify the current trend that dominates the stock market, accurately project how long it will last, and position investments in a manner that will eventually yield a desirable amount of revenue. By choosing the right stocks at the right time, it is possible to ride out a downward trend with little or no loss in the worth of the investment portfolio and be in an ideal position to make a great deal of money once the market begins to move upward once again.
