HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
MultiBank Group information and reviews
MultiBank Group
84%

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

How to Create and Sell an NFT

In 2021, NFT triggered an immense interest across the internet. No wonder: people are ready to pay vast sums of money for NFTs, the cost of which can go up to millions of dollars...

Elevate Your Trading Game with ModMount's Index CFDs

If you're ready to showcase your financial acumen in optimal trading conditions, ModMount invites you to explore the dynamic world of Index Contracts for Difference (CFDs)...

The Intricacies of the Cryptocurrency KYC System

Cryptocurrencies, emerging as digital currencies secured with encryption, function on a decentralized peer-to-peer network and are recorded on distributed ledgers called blockchains...

What is a Decentralised Autonomous Organisation (DAO)?

DAO is the new buzzword in the array of crypto offerings aiming to disrupt the traditional models of collaboration and organisation. A DAO can be used to create...

What is tokenomics? Understanding the token economy

With thousands of cryptocurrencies available, traders are beginning to think to themselves "What makes one crypto more valuable than another?" Tokenomics will help make sense of this.

What is TradeCopier? Complete Guide to Copying Smart

With such technological advancements taking place every day, forex trading could not have been left behind. One of the most anticipated platforms of the year...

What is Decentralized Finance, or DeFi?

Decentralized finance, or DeFi, is similar to but not identical to Bitcoin (BTC). The term "DeFi" refers to financial systems enabled by decentralized blockchain technology. DeFi is mostly linked to the Ethereum (ETH) blockchain...

How can you make money on the stock market with Olymp Trade?

Profiting on the success of Tesla or Google - isn’t that tempting? The stock market gives you a chance at that, as well as a number of other opportunities to profit...

Olymp Trade: What a Crypto Investor Needs to Know in 2022

The year 2021 was a tremendous success for the cryptocurrency market. Bitcoin hit an all-time high as did nearly all altcoins. However, 2022 started with a big price drop...

US Stock Indices: The Past and the Present

There is a saying in the world of finance: "America will sneeze, but the whole world will catch a cold." But what is the way to determine how serious...

Chainlink: Is It on Track for a Bull Rally?

If you have recently watched the crypto charts, you can see the growing popularity of many coins, including Chainlink (LINK). And while so many assets are on the bull run...

Is the US market too expensive during COVID-19?

Global financial media have reported the "extreme cost" of the US stock market in recent days. In theory, this should be followed by an imminent collapse...

Deep-Dive With Us: What Is Tron?

What comes to mind when you think of the word "Tron?" For some, it's a cheesy 80's movie. For others, it's a promising blockchain platform. In today's article, we'll take a look...

Crypto CFDs: A Comprehensive Look at the Modern Alternative to Direct Cryptocurrency Trading

Cryptocurrencies have marked their presence in the investment world with their decentralized, transparent, and private characteristics. While direct ownership of cryptocurrencies remains a common choice...

What New Crypto Coins Are Coming in 2022

The crypto industry has experienced an eventful 2021. The world's largest investment funds are actively investing in various crypto assets...

What is an NFT?

It is fair to say that 2021 was the year of NFT, Ethereum’s enfant terrible. Non-fungible tokens invaded the world of digital currencies to become...

Unlock new trading horizons with OctaTrader

As e-brokerage moves towards customer-oriented, user-friendly solutions, we at Octa, a global broker founded in 2011, have introduced an enhanced version of our proprietary trading platform, OctaTrader. In this overview, we describe the main features of this multi-device application.

Libertex: How to invest in crude oil

Crude oil prices are affected by perceived shortages, excess supply and weather conditions, among other things. In addition, the price of oil is often considered one of the main benchmarks...

The Dynamics of Commodity Trading: An In-depth Look

From the very clothes on your back to the coffee you sipped this morning, commodities influence our daily lives. This vast market encompasses a wide variety of goods...

AvaTrade: Commodities trading explained

Commodities are basic items of consumption of the worldwide economy. Do you have an opinion on the price movements of Gold, Silver or Coffee? Act on it! Commodities...

XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
Octa information and reviews
Octa
79%
BlackBull information and reviews
BlackBull
78%

© 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.