Understanding Vicious Stock Cycles

| Total Words: 508

When investing in stocks it is important to monitor the stocks to determine whether it is performing as anticipated. Remember that the stock market is as unpredictable as a storm. Analysing the market is an art, not a science. That is why analysts tell investors, When in doubt, get out.

Bull

It is hard to get out when in a bull market. The bull trap is where a stock lifts, falls back, continue to decline and then hits to new lows. This action, leaves the stock holders with losses.

When the market climbs, investors are encouraged. They watch it drop, expecting it to climb again. In many cases, if the stock dropped, excited investors will buy up. In many cases they are laughing at the losers who sold out before the big boom. This new artificial boost drives the prices up a bit, encouraging the investor. This creates a situation where any small profit the aggressive investors hoped to harvest are eaten up in their anticipation of big gains.

These investors usually do not have an exit scheme. They have no pre determined, written in stone, strategy for when they will sell a stock. They flounder for too long before they realize their mistake. By...

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