HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

What You Need To Know About Market Rallies


Usually, the word "rally" is associated with racing. But it has another meaning besides the competition. In stock trading, the notion of a rally is used to refer to a period during which there is a rush of assets on the market. As a rule, it is expressed in the sharp increase of almost all quotes and the increase in total sales volume. Simply speaking, a market rally is a short period, when investors are trying to manage to buy more stocks with the maximum profit for themselves.

The most important indicator of the rally period is its duration. There are several options for defining the limits of a growing trend.

Most often this term means the time interval when the average value of goods or assets reaches its maximum. The duration of the rally does not have any fixed value and depends on the specifics of trading. Indicators can vary freely in the range from 30 minutes to several years.

What Causes A Rally In The Market

A rally can appear as a result of a number of factors. These can be a big deal, systemic investments – in short, anything that has a fundamental effect on the market. The most long-term ones are changes in tax policy, the conclusion of large international trade agreements, and changes in banking structures. Now we have cryptocurrencies, which are known for large-scale price fluctuations.

A price rally is not always a sign of prosperity. In some cases, the emergence of a constantly rising trend can indicate the emergence of a financial bubble in the economy of the region. In order not to risk your investment you must think of ways to get out of the market before the collapse begins.

Rally Examples

More often than not, rallies are local in nature and are strictly tied to the economy of a particular region. Christmas holidays can be used as a universal example. Market growth during this period can be explained by the general mood of consumers, who are in favor of buying gifts, and sellers, who are ready to reduce the price of goods to record levels.

Significant investment during this period raises market quotes on U.S. exchanges, which, in turn, contributes to the performance of European markets. Securities purchased with dollars generate increased demand, which in turn increases prices. 

It is important to understand that even in this case, the duration of the rally has no definite limits. It can only be determined by a clear upward trend.

Technical Analysis Of The Market During A Rally

The main thing a trader is interested in during a rally is the duration of the price race. It is a period during which the price goes from the lower local extremum to the upper one. The duration of the rally directly depends on the selected time frame. Supporters of intraday trading encounter the phenomenon quite often. For example, the price movement in one direction for an hour or two is a full-fledged rally. But if a long-term trading strategy is chosen, intraday price movements turn into insignificant market noise.

On the other hand, forward-looking investors observe rallies that last for 3 months. A classic example is Apple stock, which may increase its value by about 23% over six months. Identifying a rally is easy even for someone who has nothing to do with trading. Information about a stock's rise or bitcoin's taking another peak is being passed along to most people. The main task for a trader is to identify the moment when a rally appears and guess when the process is over.

False Rally

False rallies, or short-term price rallies, can occur at every phase of a bearish or bullish market. Their main characteristic is that they are short-lived. Such rallies can occur several times during a bearish trend. Analysts and investors divide such rallies into "relief rally", "sucker rally", "echo bubbles" and "exhaustion", depending on the phase of the market.

Trading Rules

The example of Christmas rallies teaches us that even when there is a high probability of placing a successful trade, it is only about 70%. There is no guarantee that a particular trader will not enter the remaining 30%. A rally is a long-term ascending trend, so it is better not to open short positions, and entry points are sought using standard indicators. You can use MACD, RSI, and other such things. The reason is that the trader does not need to determine the fact that there is a trend. There is a trend in the market, and that's for sure.

It is better to divide the trade into two orders. In the first case, it is necessary to leave the market at the moment when the desired level of profitability is reached, and in the second case, the indicator that will show the right moment is used.

Trading During The New Year Rally

To achieve a successful result, it is necessary not only to follow the general market trends but also to have clear confirmation of the expressiveness of the trend. For analysis, it is sufficient to be guided by the basic indicators, for example, MACD. The most important thing in the New Year rally is to choose the best moment to enter the market. This may be a major event on a local or global scale. At the same time, there should be a long-term effect on market quotations or any other financial instruments. Companies that show regular growth during the Christmas rally include the fast-food restaurant chain McDonald's, the coffee chain Starbucks and Disney. Not to forget about Apple, which usually announces the launch of new models of its gadgets during this period.

Christmas rally has some general principles but may differ depending on the characteristics of the economic structure of each market. It is most pronounced in Europe and the U.S., where Catholic Christmas is a public holiday. According to general statistics, the Dow Jones Index rises the most.

Although a market rally is not a fully understood phenomenon, a basic understanding of the process is enough to make a profit. The most important thing when trading during such a period is to determine the beginning and duration in time because going out with long positions "under the curtain" is of no practical importance. The best option for making a profit would be to participate in the New Year's rally. This is because the framework of this period is clearly limited, and the priority directions are known and well-studied, so the risk of financial losses is practically reduced to zero.

What Do Experienced Traders Say?

As analysts say, investments in stocks are great for those who are going to profit from them in five to ten years. In this case, it does not really matter when the new rally starts, and how long it will last. With proper portfolio diversification and regular investing, you can build up good capital for a secure old age. But for those players who are used to earning "here and now", experts advise going deeper into the study of market processes to more intelligently approach each step.

Conclusion

The rallying market is a great way to increase your income. There is an upward trend, you can painlessly increase your capital. The main thing is not to make a mistake with the entry and exit points. However, if we are talking about a prolonged rally, even an exit point that is not quite right guarantees high profits for the trader.

#source


RELATED

What's best: Forex robots or trading strategies?

Regular winners of Grand Capital contests sometimes honestly admit to the use of Forex robots. Meanwhile, many participants use contests to test their trading strategies...

Analyzing Cryptocurrencies: Key Notions

Today few professionals can boast of an impeccable trading process with cryptocurrencies - there are many nuances. In our article...

Synthetic and Crypto Currency: What Are They, How to Create and Use Them

The set of trading tools that NordFX offers to its clients is a whole arsenal that allows a trader to apply the most effective strategies and win on the fields...

Bitcoin trading: how to trade bitcoin in 2020?

Bitcoin has become an extremely popular financial tool in the past few years. However, not many people are familiar with the basic concepts of this cryptocurrency...

How to Identify a Suitable Broker for Trading Crypto

Cryptocurrencies have become attractive both as trading and investment instruments. The uniqueness of this market sector puts additional requirements on a broker that...

Mastering Bond Trading in 2024: A Comprehensive Guide

Bonds, often referred to as fixed income securities, continue to play a pivotal role in the financial landscape, serving as a fundamental instrument for governments and corporations to raise capital for various ventures...

Maximize Your Profits in 2022 Through the Best Forex Advisors

Practically all modern Forex expert advisors are built on the foundation of the complex programming language called MetaQuotes versions 4 and 5, which are also used...

Understanding Return On Assets (ROA)

The stability of a company's financial position depends on several factors, including its business activity, the number of sales markets, the company's reputation...

Trading on the news: Pros and Cons

Most often, the most significant changes in the Forex market occur after the financial, economic and political news and the reaction of the market to them...

Copy Trading Strategies: How to Start Successful Copy Trading

To be a successful copy trader, you need to understand quite a bit of nuance and things to ensure that it is the profitable venture you are hoping for...

Automating Your Forex Trading

As the forex market moves enthusiastically into the electronic age...

What Is the Fear and Greed index?

If you trade crypto long enough, you will eventually come across the term “Crypto Fear and Greed Index.” This article will look at this useful tool, how to use it, and what it can mean for your cryptocurrency investments...

All You Need to Know About Trading in the Best UK Penny Stocks in 2021

Ford, JD Sports, and Monster Beverage were among the many well-known firms that once traded for less than 1 pound a share. Those who bought these businesses...

Relative Strength Index

The Relative Strength Index (RSI) is an oscillator that measures a particular financial instrument's current relative strength compared to its own price history...

Understanding What Crypto Trading is All About

The idea of Bitcoin and other cryptocurrencies feels like it has only just been created, but the first instance we see of these digital assets came out around 11 years ago...

How to Trade Cryptocurrency Like a Boss

In 2009, bitcoin was relatively worthless, and as such, nobody was interested in knowing how to trade bitcoin. But a decade down memory lane, cryptocurrency is...

Trading Like A CFO - Organizing

Once you've got your trading plan in place, it's time to put it in practice. This is the fun part that got you interested in trading in the first place, so you've...

VeChain: Is It on the Verge of Massive Growth?

Asia continues to be at the forefront of blockchain development, and VeChain is one of the brightest crypto projects in the region. There are different opinions...

Ten Tips to becoming a Forex Trader

Getting started in forex has never been simpler. Easier access to currency markets and brokerage platforms that fit a range of trading needs has become widely prevalent...

When is the best time to buy Bitcoin?

Should you buy Bitcoin at $20k or wait for an even bigger drop? There are many arguments in favor of not postponing the purchase of the flagship crypto...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.