Market Cycle A Stock Trader Should be Familiar With

A stock price never,not even in your wildest imagination, follow a straight path. If you see one, then you must be dreaming. Being familiar with the typical marke cycle is important for this determines your current position before you enter a stock.
There are four main parts of a market cycle:

• Peak: When the economy is at its peak, it is performing at the highest level. Stock prices have been rising consistently and are at the highest point they could reach.
• Downtrend: Stock prices begin coming down and the nation's gross domestic product beginsto suffer. Jobs might be lost as companies tighten their belts. After a few months of a downtrend, the economy is oficially said to be in a recession. The downtrend is when the short sellers should start to be excited. Stocks are tumbling down at this stage. The bottom of the market is still in the future.
• Trough: The trough occurs when the economy hits a bottom. Short sellers, if they are lucky enough to recognize the trough, should cover their positions. If a trough occurs for a long period of time, a depression will develop. The generally agreed upon timeframe for declaring a depression is when a trough occurs for six moths or longer.
• Uptrend: When the economy begins to recover, stock prices will begin slowly rising. It takes much longer, in the vast majority of cases, for stocks to recover their prices than it does for them to come crashing down.