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Article Summary: Patterns and sequences are the useful estimations of support, resistance, momentum and other clues of strength and weakness in the stock market business. Hence, if you understand these patterns and sequences, you can able to determine the market direction with time in and time out.

Understanding Patterns and Sequences in the Stock Market

Understanding patterns and sequences in the stock market helps you to determine the current demand and supply forces in the stock market. Patterns and sequences in the stock market let you to find out accurately as what is the present trend in the stock market business. At times, you can use graphical representations to understand these patterns and sequences in the stock market. Even today, numerous people use this kind of graphical representation to understand ever-changing stock market prices.

Trading with practical analysis needs accurate identification of stock market's patterns and sequences. Practical analysis is the scientific study of stock price history. It helps you to determine future opportunities in trading with stock market. Price history is normally the visual depiction of several things such as what was the initial price of stock, current price of the stock, future likelihood of increase in the stock price, where sellers and buyers lurk, and the trading psychology in the stock market.

Sequences exist in all aspects of life. However, they range from short-term to long-term such as, from life sequences of a June insect that lives for a few days to the life sequences of a planet that takes millions of years. No matter, which market you refer to, all will have same aspects and go through same phases. All markets have same cyclical phases. They go up, apex, come down, and then approach bottom.

The main problem is, many people and investors fail to understand the market's sequence, or they overlook the end of present market phase. Another important thing is, even when people admit the presence of sequences, it is almost impossible to choose the bottom or top entity. However, understanding of sequences is necessary, if you wish to maximize trading or investment returns.

There are usually four major modules of the stock market sequences to understand:

Accumulation stage: This phase takes place, once the market has faced failure. The early adopters and innovators start purchasing, thinking that, the most awful condition is over. At this stage, the valuations of stocks seem to be very attractive. Hence, the overall market condition begins to change from pessimistic to optimistic.

Mark-up Stage: At this stage, the market slowly starts rising and picks up momentum. The investors feel free and start trading, as the market supersedes its failure. Valuations of the stocks mount well beyond their historic norms. Thus, it is the perfect time to buy and sell shares.

Booming stage: This is a stage, where the stock market attains its full prosperity. There is a lot of happiness. Profit and good valuation exist in the stock market business. Investors deal largely during this period. This is a perfect time to sell shares, since you can expect high profit in this phase.

Mark-Down Phase: This is the final stage of the stock market, where everything seems to be slip-up and failure. Prices of stock market come down and investors suffer loss.

Overview:

Often, short-term traders study these chart patterns and sequences, to gauge demand and supply forces in the stock market. These demand and supply forces are the fundamentals of the stock market fluctuation, which enable you to make profit. Patterns and sequences are the useful estimations of support, resistance, momentum and other clues of strength and weakness in the stock market business. Hence, if you understand these patterns and sequences, you can able to determine the market direction with time in and time out.

Hence, it is necessary for you to understand these patterns and sequences carefully and accurately, only then you can benefit out of it.