Ever watched surfers riding waves on the sea? Riding stock markets is a bit like that, except you need to know just which wave to ride and which to avoid. There's a fortune to be made or lost, depending on how one tackles market forces. Markets go through cycles of up, down, and sideways. Each cycle tests an investor's skill in many ways.

Falling prices and dipping volumes characterize Bear Markets. The bottom of a bear market can, however, be marked by either a Selling Climax with great volatility, or an almost complete absence of volume. Very high volumes and high price volatility is indicative of a Selling Climax. Though rare, Selling Climaxes signify that demand has overwhelmed supply and completely mopped up available shares at the given price.

Usually a bear market is marked by reduction in volumes and a gradual absence of activity. Prices drift down until such a point where all the selling has finished. Then prices slowly recover along with slowly improving volumes.It may take several months or even years for a long bear market to end. This is the best time to buy because stocks are available cheap. It is the surest way of ensuring long-term gains. Remember, here is when patience pays. It is wise to hold on to stocks when market hits low and wait for prices to recover.

Trading a bear market is always difficult because of the absence of activity. One should carefully research good companies and create a cheap blue chip portfolio because good companies with established track records are available cheap. This is also the best time to identify new winners since speculative activity is almost nil. Patience, deep pockets and good research win handsome dividends in a bear market. Don't try to make fast gains. If you pick companies that survive and outperform, you will be amply rewarded in the next bull market.

A bull market witnesses a lot of trading and prices may start to double every two months. There are generally higher volumes, but this may start to taper off toward the peak due to lack of demand. When everybody is very bullish, there is actually no demand left because all the prospective buyers have already bought. That is why volumes drop.

At this stage, investors have to be on their toes because the slightest failure in expectations will crash the market. It may be a variation in government policy, or a scam, or a sudden hike in interest rates. Suddenly, the market begins to slide. Expectations are so high that they cannot be rationally met.It is possible to make money in many ways during a bull market if one picks the right stock to short. In a bull market, there will always be some buyer. But in a bear market it is difficult to sell because of lack of buyers.

Keep a close watch on interest rates because the stock market generally moves inversely in relation to interest rates. At the bottom of a bear market there is a lack of demand for capital and so interest rates are low. This results in cheap buys which drives prices up. At the top of a bull market, demand for expensive stocks leads to higher interest rates.

Watch, wait and strike when the iron is hot……. And ride the wave to profit. That is the secret - riding, hanging on, taking everything in your stride, the dips and heaves. Above all, don't panic.

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