Stock Markets never remain static. Volatility is the essence of Markets. But there is a difference between volatility and Rise and Fall.
Is the consequence of a change in sentiments influenced by short duration factors? These factors may be International, National, Political, Monetary, Economic, etc. Demand and Supply in stocks, excessive speculative activities in stock markets also are major reasons for volatility. In volatile market stocks or indices move in a range but with an unusual magnitude.
Swings occur either side and Frequently and sharply. Volatility is the darling of Stock Market Traders.
Is a state of the market when the majority of Shares and Indices, as well, keep and continue the upward trend in prices. In such a market fundamental of stocks lose the relevance, only technicals work. Optimism rather extreme optimism prevails which leads to a euphoric atmosphere. In such a situation, investors should refrain from investing. Broadly narrated bull market.
Is a state of the market exactly contrary to the bull market? The falling market can be categorized as a bear market. Prices of stocks continue to fall. In bearish market also fundamentals are ignored. Price to earnings multiples contract dividend yields expands. Profitability and valuation ratios become lucrative. Pessimism persists and investor shies away from investing due to pessimism.
WHAT TO DO IN A FALLING STOCK MARKET?
First and foremost one should win oneself psychologically over pessimism. Besides, wealth management is imperative to discipline trading.
Remember, In a bull market, People repent for not investing when the shares were available at throwaway prices. This kind of opportunities never emerges often so one should buy shares of good companies with sound financial fundamentals with the time horizon of at least three to five years. Markets will definitely take a turn from bearish to better considering that stock markets never remain static.
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