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| Noticing Stock Market Trends |
By:
Doug Beavers |
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Stock market trends and a great way to predict what a stock may or may not do. One of the common mistakes with the stock market is someone noticing that a certain stock has jumped in value in the last couple weeks and buying that stock for that reason. You must remember to look at the long term trends of a stock before investing you money into it. Look at the past few months or even years and try to figure out a pattern for the stock. You will often notice that it dips and rises several times during those long periods and you can use this pattern the determing when to buy or sell the stock. This does not always hold true as a company may release a groundbreaking product that will drive up the stock substantially but for the most part this method does hold true.
When you look at the past week performance of a stock, it will often look very choppy, like someone just scribbled on a piece of paper. When you extend that out to a month it still looks quite choppy but you will notice it begins to smooth out. Extend that out to several months and a pattern begins to appear. Extend that out to several years and you will be able to see smooth curves of up and down patterns and be able to disginguish when the stock was doing well and when it was doing not so well. This is why you must look at what happened in the past of the stock before buying it. And not just a few months in the past but a few years.
If a certain stock is doing very good one week and you think it is a good investment, but you look at how it was doing in the last couple years and you notice that it looks like it is about to peak, it would not be wise to purchase this stock as you may only stand to lose money. On the other hand, if you look at it and it seems to have hit bottom and is making a turn and heading back up, it is a great stock to invest in as it will most likely gain in value. This up and down motion is why the stock market is called a roller coaster and this is why it is often stressful to the individual who has their money invested in the stock market.
This is also a good method to use when trying to determine when to sell your stock. There were many people who lost money a few years back when the stock market peaked and then plumeted. This was a special case as nobody could predict that it would fall that much but there were a few people who noticed that it was going to peak and got out right before it fell. It is these people who make the most in the stock market. If you are wanting to sell a stock but are not sure if you should do so, just look at it's history. If it looks like it is about to peak, then go ahead and sell the stock. If it looks like it may still have some room to increase in value, hold on to it for just a little longer to increase your profits.
You must remember, however, that this is not a guarantees method to make money. As I said, a company may put out a product that greatly increases the value of it's stock way over the predicted peak value. Likewise, some unpredicted occurance within the company may cause the stock price to drop substancially in a weeks time when it looked like it was only half way to its peak value. Despite these special cases, watching the long term trends of the stock market is often an effective way of taking profit from your investments in most cases.
The bottom line is when looking to invest in a company, look at the long term performance of the stock and not just what has happened to it in the last week or month. Try to determing where the peak and the trough of the stock is and try to buy when it just begins its climb back to the peak. When holding the stock through several peaks and troughs, only buy when it is in a trough, this will maximize the value of your portfolio with as little investment from you as possible. |
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