Market Sentiment

A popular saying on Wall Street that describes market sentiment is “all boats float or sink with the tide.” Market sentiment is a broad term that describes the way investors are feeling as a whole. Market sentiment can push prices higher than ever or bring them down to unprecedented lows. It has a huge effect on every single stock, so understanding and predicting it is important for traders at every level.

There are a few factors that go into creating market sentiment. First, national and global events will affect the mood of investors as a whole. Second, analysis and data also are thrown into the mix. In general, market sentiment is described as being either bullish or bearish, with bullish sentiment driving up prices and bearish ones pulling them down.

Many people attempt to identify the current and future market sentiment by charting several key commodities or by simply charting daily averages, taking relevant developments into account as well where necessary. This is a good way of seeing where the stock market is headed in general, although not an effective means of predicting the movement of any individual stock.

Because market sentiment is diverse and difficult to analyze, there are almost as many means of measuring it as there are traders. However, most people only need to remember one key fact: that market sentiment affects the trading of individual stocks and thus should be taken into account every single time you buy or sell. The stock market is full of people, and market sentiment is a description of how they are feeling that day.

Market Timing

Market timing is a diverse topic, but it can be summed up as making choices based on predictions of the future movement of a financial market. This usually consists of using charts to identify market trends, buying when a stock is about to move upward while selling when a stock is about to move downward. Many investors look not just at the individual stock analysis, but also at the unique aspects and history of the company or commodity in question as well as the general movement of the stock market as a whole.

There are two schools of thought when it comes to buying and selling based on market timing. Some people believe that market prices cannot be predicted and that making decisions based on technical analysis is a form of gambling. For example, there are times when the market crashes and even stocks with indicators of bullish movement end up having lower than ever prices. Others have found great success using candlestick analysis and other indicators to predict future behavior, and thus believe very strongly that market timing can be effectively and accurately predicted.

Regardless of one’s personal opinion on market timing, it is the only method of selecting stocks outside of randomly choosing them. All traders attempt to predict the movement of markets that they are going to invest in; this is the very essence of the business. While using charting and technical analysis is not a perfect science, market timing remains one of the most effective ways of making money in the financial markets.

Trends can be defined as the course of a market, whether it is upward, downward, or even sideways. Every market, whether it is fashion or food, has trends and the financial markets are no exception. In the case of financial markets such as the stock market, trends are significant because understanding them can increase profits and decrease losses for traders and everyone with money in the market in question.

In general, there are two main trends that are noted by market analysts: bull trends, which imply a market with a price moving upward, and bear trends, which imply just the opposite. Generally, no trend is forever; a market that is moving upward will eventually reach a ceiling and move downward, while a down market eventually shifts and moves upward once again.

The key to market analysis is identifying these trends during the actual shift, so this information about the future can be used to maximize profits and minimize losses. In general, one should buy when a stock is low and about to move upward, while selling when a stock is at its uppermost point and about to turn downward.

During a bullish market, bear movement is far less than bull movement. While a particular company may be moving downward, in a bullish market it is likely to rebound rather quickly. Competent analysts look not just at the trends of a particular company, but the trends of the overall financial market for complete picture of what is happening. Like all markets, the financial market moves in cycles, so getting in tune with these trends and learning to analyze them puts a person at a huge advantage when it comes to profiting from the stock market.