Many years of observation, refinement, and analysis reveal the distinguishing characteristics of the four types of changing market:
1) The trading market changing to bear market
2) The trading market changing to bull market.
3) The bear market changing to trading.
Big and heavily capitalized traders who pyramid their positions have a decided advantage in massive bull trends-the markets go in one direction and take a long enough time to do it so that the traders can continually add to their long positions. In bear markets, however, the smaller trader makes a little money very fast: the market does not stay at one price long enough for the trader to add more to short side. The downtrend is quick and fast-if traders aren’t positioned early to the downside, they won’t be able to get into a short position when the collapse occurs.
There are two types of trading markets; bull markets and bears markets. Both of this trading markets are characterized by the same feature: prices traverse great distances in a short period of time. The move is violent and is in one direction. This one-directional moves may or may not be move according to high volumes. For a better technical grasp of the volume factor in this stage of market better to see how volume behaves in the various types of downmoves and upmoves.
Bull vs. Bear markets:
There are many subtle differences between the behavior of bull trends and bear trends which would require too much detail to explain here. However, one remarkable distinction is that bear market trends are fast and brief and cover great distances in a short period of time. True bull markets, however, are slow and long-drawn our affaires, covering great price distances and taking much more time to develop. Uptrends that are relatively quick and brief and also cover great distances in a short period of time are not true bull markets, but rather reactions in bear markets. Awareness of this fact should help the trader in determining whether or not an upmove is a true bull market of rather a reaction in a bear market.
All trading techniques are designed to give the trader actual buy and sell “ signals,” or indications that it is good time or price to buy or (cover a short) or sell or (go short) . Some methods also show at what future price traders should Start to buy or sell. Brokers need to know when price breaks that level.
Prudent traders also realize that even the best technique can get them into losing situations. These traders use “ stop-loss orders.” A stop-loss order is placed below the price of the entry order or above the price of an exit order. If the price goes against, them their brokers have an automatic order to close out the position when price reaches that stop-loss level, handing the traders a small, controlled loss. In this way, they avoid surprises and control their exposure.
