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Highlights:
- A market trend can either be on a long-term, mid-term, or short-term basis.
- An upward trend, commonly known as a bull market is when the price of the stock is described as a rising trend.
- A bear market tends to appear when a recession enters the economy, and inflation and unemployment rates are high.
In the broader market, the overall trading direction is termed a market trend. It can either be on a long-term, mid-term, or short-term basis. Many factors in the market decide the direction of the trends. These factors can either lead to a sharp spike in stock prices or can make them go in a downward direction.
Mentioned below are the market trends that dominate the market at some point or the other:
Types of Trends
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Bullish
An upward trend, commonly known as a bull market is when the prices of stocks rise in the broad market indexes. Bull markets tend to come into the picture when the economy is strong.
To some extent, the psychological state of investors plays a crucial role. For instance, when investors feel that the market is moving in an upward direction, they tend to buy more stocks. If a large number of buyers are buying more stocks, the stock prices tend to move in the upward direction.
A bullish market follows a zigzag trend. The graph facilitates investors to draw a comparison between the higher highs and the highs and higher lows and the lows.
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Bearish
The market that moves in the opposite direction and forms higher lows and lower highs is known as the bear market. There is a trend line that connects the dots between the low and the high points and shows the stock price movement over a specific period.
A bear market tends to appear when the recession period enters the economy, and inflation and unemployment rates are high. As mentioned above, investors’ psychological state also creates an impact on the trend. They may lose faith due to a downward trend and this may further lead to a decrease in demand for stocks.
Secondary Market Trends
Secondary trends refer to short-term changes in stock prices. These occur within a primary trend. The duration of such changes is limited to a few weeks or a few months.
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Correction
Market correction is a fall in the stock prices from 5-20 per cent over a short period of time. It may start from weeks and can go up to a few months. Generally, these are price declines on a temporary basis and may hamper an upward trend in the short run.
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Bear Market Rally
When stock prices increase during a bear market, it is termed as a bear market rally. Like the market correction, it is also short-lived. For a bear market rally, there are no official guidelines that can be followed. Usually, an increase of 10-20 per cent during a bear market is an indication of a bear market rally.
Bottom Line:
Market trends are an indispensable part of every stock market platform. Before relying on any trend analysis, establish the credibility of the source. Along with referring to such platforms, it is important to have a grip on the factors affecting different market trends. Operate in the market with vigilance and make sure to move with the market trend and not against it.
Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
