If you want to make money by timing the stock market you need to follow the trends.

Buying and selling creates its own momentum and a market that’s moving up or down is likely to keep moving in that direction for a certain period of time.

What this means is that you should avoid trading against the current trend.

For example, when the market is bearish and heading down, don’t try to predict which stocks have hit bottom, that would be like trying to catch a falling knife.

Instead, find an objective way to both identify the current trend and decipher when that trend has changed too, because just like the saying goes, “the trend is your friend, except at the end”.

So, let’s explore two simple techniques for identifying market trends.

The most common ways to look at the nature of a trend’s movement. As a stock moves up or down, it rarely does so in a straight line, rather it zigzags forming a series of highs and lows.

If the highs keep getting higher and the lows keep getting higher that stock is in an uptrend. If the highs get lower and the lows get lower, you’re looking at a downtrend. And if the highs and lows are consistent over a certain period, it’s in a sideways trend.

Another way to identify the market trend is to look beyond the daily price fluctuations and determine the general direction of a stock.

You do this by calculating an average. For example, a 20-day simple moving average or an SMA, is an average of the past 20 days of closing prices, which moves or updates on a daily basis by incorporating the latest prices.

If the SMA is sloping upwards, that’s an uptrend; sloping down downtrend and sideways, means flat.

A 20-day SMA gives a good picture of the short-term trend but you can also use other periods like the 50-day SMA and the 200-day SMA for the long-term trend. Those aren’t the only moving averages, however, there’s the exponential moving average or EMA, and the weighted moving average or WMA, which gives more weight to recent prices.

As a trader, you can use any of these techniques individually, but for the most accurate picture of market trends, you should use them all.

Because when it comes to behavioral analysis, the best way to increase your chances of success, is to consider as much data as possible.

So that’s market timing! Next, let’s cover support and resistance zones.

The price of every stock or financial product fluctuates over time, and no matter how strong a stock is or how solid its fundamentals, you can only make money when the stock goes up in price relative to where you bought it. That’s why it’s so important to read the market accurately and buy stocks at the right time.

The goal for any investor is to buy a stock just before it makes a big move, and sell it just before it starts to decline. The question is how do you do it?

For starters, you want to look at the big players on the financial landscape, like banks and financial institutions.

These are the organizations who determine the direction of a stock more than any other. If they start to buy a certain stock in large numbers, chances are other investors will follow suit, leading to a rise in value. And if they start to dump a stock, then other shareholders will likely do the same, causing a decrease in value.

By keeping a close eye on what these institutions are doing, you’ll be able to spot shifts in the market before they happen.

This study of market behavior is known as behavioural analysis and encompasses three main schools of thought: classical technical analysis, indicator-based technical analysis, and price action and volume analysis.

Classical technical analysis is all about reading charts. The goal is to identify the trend lines of a particular stock and pinpoint the support and resistance zones, where buying and selling usually takes place.

Classical technical analysis also includes pattern recognition techniques, used to identify shapes on the chart which have a certain predictive value.

Then, there’s indicator based technical analysis in which you take price and volume data and plug it into a mathematical formula to figure out when to buy or sell. Unfortunately, most indicator signals tend to be lagging, which can result in misleading or inaccurate analysis.

Finally, there’s price action and volume analysis, in which a trader leverages their deep understanding of market movements to interpret price and volume data directly. It’s the methodology that most professional traders use as it allows faster, more accurate predictions.

Those are the basics.

Over the next few videos, we’ll dive a little deeper and teach you how to identify market trends and most importantly how to pinpoint the right time to buy and sell.