It can be difficult to identify stock market trends if you do not have an idea on how to read the signs. But the thing is that there is a pattern when it comes to where the market is headed and it is just up to you in being able to figure out this pattern.
- Direction: When you are starting, it is paramount that you are able to at least see the general direction of the current market trend. Observing the changes which takes place in the prices and volume can help you plan for future stock investments. Just keep in mind that the volume shows if there is any movement in the market while the price will reveal which direction a particular trend is going.
- Volume Indicator: When the market shows a high volume as well as prices going up, chances are, what you have in front of you may be mutual funds and or institutional investors who are buying some stocks. These signs will tell you that the market trend is rising. At the same time, if the volume is high but the prices are low, it means that the trend is not favorable and is going down.
- Changes: Just remember the law of supply and demand. If there are a lot of buyers expect that the prices will be high and on the other hand, if there are a lot of sellers then expect that the prices are low and means that the trend is downward. Also keep in mind that institutional investors are big contributors in the stock market so observe where they are headed because wherever they go, that is where the market will be heading.
When it comes to the stock market, do not expect to master it overnight and the fact is, it is rare for a person to be fully knowledgeable when it comes to identifying trends. The key here is having the right attitude in investing in the stock market.