subject: A Way To Know Market Direction [print this page] One in all the foremost important things you need to recognize before buying any stock is that the direction of the general market. ninety% of all stocks go UP in an exceedingly general bull market and ninety% of all stocks go DOWN in an exceedingly major bear market.
However how do you know why even the therefore-known as "sensible" ones go down once they haven't lost their value. Sales, profits, everything remains the same nevertheless these stock decline in price.
Your broker or monetary planner will not tell as a result of virtually none of them are taught this easy technique. You'll be able to test it out yourself.
Within the newspaper Investors Business Daily there is printed many times every week the IBD Mutual Fund Index. Study the 200-day Moving Average dotted line. When the direction of that line goes up it is a bull market. When the direction of that line turns down as it did this past July it is a bear market. Very simple.
This index is created of 24 giant mutual funds. They own lots if not thousands of various stocks. This dotted line that's computed each day is composed of those thousands of stocks. From the direction of the dotted line it clearly indicates a bull or a bear market.
This is a very long run signal and is not for short term trading. It's ideal for retirement and school plans. The inexperienced investor will need any knowledge of fundamental or technical trading techniques.
It is advisable for those not following the IBD Index when buying any stock, ETF or mutual fund there should be an open stop loss order placed immediately. With mutual funds it can have to be a mental stop where the investor keeps track. The foremost any prudent investor is willing to lose is regarding 10%. He might risk a lot of, but that's up to each individual. Do not depend upon any broker to guard an account.
Once a market starts down it begins to feed on itself. Patrons hunker down and slowly disappear. The prudent investor will look at his portfolio statement fastidiously every month. If any mutual fund goes down a lot of that the set quantity he has set upon (perhaps 10%) he should call his broker and all that cash transferred into a cash market account.
Cash market funds do not pay abundant, however whether or not the quantity is zero percent a minimum of the cash is being secured whereas awaiting the following shopping for opportunity.
All investors and even day traders ought to remember of general market direction because it can aid in establishing equity positions.
