Ride the Bull,Ride the Bear

One would have commonly heard the words "Bull Market" or "Bear Market". Did you know that the average investor detects the Bull market only at the near end of the move and the Bear Market to be so very painful that the investor either holds all his stocks and gives up, once again, at the near end of the Bear Market?Most investors give up mid-way and never enter the Markets again. Did you know that there are ways to be able to spot the Bull before it makes its run upwards and gives up his positions before the Bear takes total grip?Did you also know that Professional Traders/Investors make profits from the Bear Markets as well and are able to sell first and buy back later and thus gain in what is deemed as a Crash and the onset of Bad times?   Stock Markets move in upswings and downswings .They are called the Bull Markets in upswings, and Bear Markets in downswings. The Bull Market  Deemed by novice investors as positive, a smile on their faces through the day as their funds get on to the positive and their investments multiply ,the Bull Market is associated with all things positive. Great adjectives on the smiling side are attributed to these years as wealth managers go their merry ways to get clients on board and traders and investors who love anything "up" and "positive" start flooding the markets. Bull markets strongly start attracting investors as it gets vertical, more climactic as neighbours and associates laugh at the person yet to get into the markets, as easy money gets made, and as is the nature of the human mind, everything that goes up will always keep going up. Reality though is far from it.  The Bear Market  Deemed by novice investors as negative, a frown on their faces through the day as their funds get on to the negative and their investments lose value ,the Bear Market is associated with all things negative. Great adjectives on the frowning,sulking side are attributed to these years as wealth managers  still go about their merry ways to get clients on board with a promise that as markets drop, these are actually discount rates and one should keep buying as markets plummet. Novice traders and investors who hate anything "down" and "negative" start leaving the markets. Bear markets strongly start sending investors into a panic as prices gets vertically down. Fear grips everyone as stocks and commodities bought during various phases of the Bull Market now start crashing. Doom and Gloom fill everyone's mind as neighbours and associates laugh at the person getting into the markets. There is pain, there is fear, there is doom, there is chaos, and there is gloom, and as is the nature of the human mind, everything that goes down must always keep going down. Reality once again is far from it.  Identifying Bears and Bulls The true Bull Market, the Uptrend, starts at a point where investors and new traders have given up hope that this Market will ever rise again. The true Bear Market starts at a point where the Investors are at the heights of Euphoria. The Professional Trader uses charts, many professional investors do the same ,for the chart correctly depicts human emotions and their play. Correct  decisions can be made with correct reading, correct reading comes from correct knowledge and the exact point where the Bull starts and ends,and where the Bear starts and ends can be accurately determined.  Riding The Bull With correct knowledge, the Bull Trend can be detected far before the smiles come onto the faces of the common folks. Far before it practically gets impossible to get onto it, let alone Ride it. Do notice that the word used is " detected", not anticipated, not predicted, not guessed .It can be accurately detected and ,following all the Rules and adhering to the Knowledge that we have, that Trend can be ridden.  Riding The Bear This is the Big Negative, the place and time for tears to flow and gush forth, but on the contrary, this is the time where the Pro Trader is all smiles ,the Pro Investor who is a Bulls only Investor is also all smiles as he awaits his next opportunity. They are far from tearful. Professional traders make huge gains during this time. Frowns and tears continue for the novices as Professionals step in, with glee and capitalize on the tears of the others. The Bear Market can be detected by correct knowledge, and the Bear too can be ridden to its final move. Conclusion Human emotions are at play when one gets into the markets. One must learn how to correctly identify change in trends. Price action trading eliminates the focus on the Bear and the Bull, it changes the focus from up and down to correct and incorrect. Huge gains can be made either directions. For that, Knowledge ,as always, is Key.

Direction of Trends – Uptrend, Downtrend & Sideways!

Image Source www.freepik.com 

This blog was first appeared in 2007 in a popular trading forum. 

How to determine the direction of the Trend?

Look at your right hand with the palm facing you.First we have the little finger.The Ring Finger takes out the high of the little finger and therefore makes a higher high and low as compared to the little finger.The middle finger makes a higher high and higher low as compared to the ring finger.We have therefore an uptrend.The index finger makes a lower high and a lower low as compared to the middle finger.The thumb makes a lower high and low as compared to the index finger.We have therefore a downtrend.

Just as trend can be classified according to the direction,so too can we categorise trends into 3 categories

MAJOR ,INTERMEDIATE and NEAR TERM TRENDS.

Simply put,major trends last for greater than 6 months.Intermediate trends last between 3 weeks to 6 months.Near term trends last from a few days to 3weeks.

From a chart perspective, the major trend is seen by looking at the monthly charts.The intermediate trend from the weekly charts,and the near term trend from the daily charts.

What is seen as a downtrend on the daily charts may be nothing but a pullback on the weekly charts,and is not even evident on the monthly charts.What is seen as a downtrend on the weekly charts and a catastrophic crash on the daily may be nothing but a monthly pullback.

It is important as traders to know these different time frames and trade accordingly.The practical aspects of profiting from this knowledge,we can come to later.

For now,we don't know much......but a step at a time for now.We have our charts.All we know is that in any chart of any time frame,we can have only 3 possibilities in direction,and only 3 possibilities in categorisation.The eye can only see what the brain knows........these early days are to be spent in teaching the brain so that the eye sees the pattern from a mile.Pour over your charts and train yourself in detecting which trend the stock is in currently.It is a first step but an important first step.

About  Author

Dr. SREEKUMAR RAVINDRAN

Founder and Chief Managing Director at Tradonomix

Dr. Sreekumar Ravindran, known as Saint in trading forums such as Trader Saint Forum & Traderji, is the visionary and mind behind Tradonomix. He is a passionate trader himself and has spent over 15 years in researching and accumulating knowledge of trading and applying the same in real-time.

Dr. Sreekumar strongly believes that trading is a learnt skill and that awareness needs to be created for trading as a profession for the common man. Tradonomix is one of his first steps towards this belief, from where he intends to take Tradonomix to an advanced technology-driven social platform for learning, and achieving financial independence.