Learning the Stock Market Movement

Everyday, I learn about the stock market movement in order to get a perspective of the current stock market situation. Is it on a uptrend, downtrend or not really moving anywhere? Coupled with the knowledge of how the stock market moved in the previous sessions, this helps me in my buys and sells as I will never go long in a stock during a bear market and will never short a stock during a bull market. The reason is simple: about 75% or 80% of stocks follow the market direction. Why bother to swim against the tide when it is so much easier go with the tide? That is why i have 2 systems in place: one to long when the market is deemed to be bullish and one is to go short (still in the process of fine-tuning the short system though, beware: shorting is not for the faint hearted) when the market is deemed to be bearish. In summary, learning the stock market movement is the key to grow wealth.

Hence, when you purchase a stock it is important for you to learn about the stock market movement first. What are the most important things to look out for daily? Two key factors: points and volume. There are eight possible scenarios:

Learning the stock market movement #1: Strong Trend, high volume
1) Stock Market trends up strongly for the day with high volume. This is the preferred signal for going long in the market as it tells me that the the buying power of the bulls is strong.

2) Stock Market trends down strongly for the day with high volume. This is the preferred signal for going short in the market as it tells me that the the selling power of the bears is strong.

Learning the stock market movement #2: Weak Trend, high volume
3) Stock Market trends up weakly for the day with high volume. This is an indication of churning, which means that the big boys are selling stock to the bulls and means that the market may topple soon.

4)Stock Market trends down weakly for the day with high volume. This tells me that neither the bulls nor the bears won today even though there was a strong buying and selling power. However, they canceled themselves out.

Learning the stock market movement #3: Strong Trend, low volume
5)Stock Market trends up strongly for the day with low volume. This tells me that there was weak selling power as the bears did not make their move. Take note that it does not mean that the buying power is strong. That is why it is important to monitor the volume traded as well.

6) Stock Market trends down strongly for the day with low volume. This signifies that the buying power is weak but it does not mean that the selling power is strong.

Learning the stock market movement #4: Weak Trend, low volume
7 & 8) This tells me little except that most of the bulls and bears were sitting out for the day.

Do take note that even though I learn about stock market movement daily, I do not form a conclusion straight away. It is just one of the tools I have in my toolbox. I will make the judgment call after going through all the tools I have selected for my stock selection system. Dear reader, you should get yourself a set of tools as well if you want to do well in the Stock Market. Before that, I strongly recommend that you take some time to educate yourself and learn about stock market movement. If possible, you might want to start monitoring the daily movement as well as volume traded. Learning the Stock Market Movement will help you to reduce risk in the long run , which leads to increased profits.

Remember that in the Stock Market, what goes up must come down eventually and vice versa. It is important the spot the warning signs and enter cautiously / exit quickly whenever necessary. As of now, I have spotted a bull signal yesterday but I will take some time to guage the strength of the market before making any move. Two other bull signals have failed in June already and the Stock Market seems to be whipsawing around with a risk of another major correction. The bear power seems to be strong indeed. Nevertheless, I will continue to learn the Stock Market Movement daily before making any further decisions.

Ok folks, that's it for today. Hope that you have learned some valuable pointers from here. Cya around!

Tags: stock market, investing, trading, make money, stocks, finance, wealth building, stock market basics, stock market movement