Understanding the cycles of the stock market are essential for safeguarding your cash and making a profit. The cycles in he stock market are known as the bull market and the bear market.
Since the establishment of the stock market in 1900, there are 27 bull markets each with their own bear market. Today we are experiencing the 6th longest and weakest rally within the Dow Jones in it's history.
The stock market moves in cycles- both future and short term. The short term cycles are referred to as cyclical and the long term ones are referred to as secular. Secular markets can last a very long time between ten and twenty years. Cyclical markets occur among secular markets and last between two and three years total.
Therefore, at any given time the market will be described through it's current state of long and short term markets.
Understanding that markets we have a tendency to are in and the way long we have been in those markets are key to being successful within the stock market.
For example the secular market between the years 1982 and 2000 was a bull market. The Dow Jones Industrial Average increased considerably from a low of 800 to well over ten,000. There were conjointly a range of cyclical bear markets like in 1987.
Knowing the market and your placement at intervals it can insure you're on the proper aspect of the trend - which leads directly to profit. Most investors today have solely experienced a secular bear market where the trend is almost always down.
The last secular bear market was between the years of 1966 and 1982. The Dow Jones was at one thousand in 1966 and at an occasional in 1982 of concerning 800. The Dow Jones was essentially flat for 16 years. During flat times cash is made not by the trend in long and short markets but in picking the right stocks.
Most folks who created cash throughout this point were folks who identified undervalued investments, stocks, and corporations that were unexpectedly strong.
The long bull market led to 2000 and most stock brokers suggested that investors should build future investments. This was a smart choice for a bull market but definitely the wrong selection for a bear market. The stock market entered into the secular bear market in 2000 and can last a minimum of another 10 years.
The rally which started in 2003 and continues into nowadays may be a cyclical bull market among a long run secular bull market. Investing and holding in long terms stock will not produce a profit during this type of market.
Because of the constant bull and bear cycles throughout a secular bear market you want to be very careful in what investments you make. You want to also be ready to sell at short notice if the market turns against you. The erratic behaviors of stocks in bear secular markets makes it high risk to take a position, but high risk suggests that high profit if you perceive how to shop for and sell in the correct markets.
Investing during a secular bull market is much more stable and predictable then secular bear markets. At the tip of 2006 a brand new cyclical bear market goes to begin and last a minimum of another three years, this suggests the simplest and easiest time to invest is on the bear side of the subsequent couple of years.
Author Resource:
Adam has been writing articles online for nearly 2 years now. Not only does this author specialize in Stock Market Cycles - The Key to Your Investing Success
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