How Stock Market Trends Work

Trading floor of New York Stock Exchange. They know more about this stuff than we do, right? See more investing pictures.
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­You'v­e seen movies in which frantic stock traders are buying a thousand shares of a hot stock or dumping shares of a plummeting stock. You've seen commercials for brokerage firms that claim to have exciting prospects and strong portfolios. And you've probably heard a hundred different ways to predict the rise and fall of the stock market.

How do these traders and firms predict which shares will hit big? How do they know when to sell?

The truth is there is no magical way to predict the stock market. Many issues affect rises and falls in share prices, whether gradual changes or sharp spikes. The best way to understand how the market fluctuates is to study trends.

In this article we will discuss stock market trends, which help investors identify what stocks to buy and when. Keeping track of upswings and downswings over the history of individual stocks, as well as being aware of market-wide trends, helps investors plan buying and selling.

­Many­ factors affect prices in the stock market, including inflation, interest rates, energy prices, oil prices and international issues, such as war, crime, fraud and political unrest.

Sudden rises or drops in stock prices are often called spikes. Spikes are extremely difficult, if not impossible, to predict. Stock market trends are like the behavior of a person. After you study how a person reacts to different situations, you can make predictions about how that person will react to an event. Similarly, recognizing a trend in the stock market or in an individual stock will enable you to choose the best times to buy and sell.

Go to the next page to learn about the whims of the stock market. You'll also find out what market analysts mean when they talk about bull markets and bear markets. Which animal is fiercer?