Stock market trading hit a crescendo in the late 90s, when the great dot com bull market was going on. I remember back then, it seemed that everybody and anybody had a good stock tip. The market was in such frenzy that everybody actually did have a good stock tip. It all came crashing down in March of 2000 and continued to fall for two and a half years until the October 2002 bottom.

The bear market of '00-'02 provided a very valuable lesson: the stock market is not to be ignored. Unfortunately, a lot of people failed to learn that valuable lesson. Many advisors and brokers told their clients to "wait it out" as they assured clients their investments will return to past glory. That is not always the case as Enron and WorldCom showed us. The bear market should have shown people that it is important to understand how the stock market works. It is good to have a good introduction as to what you need to know in order to understand the stock market.

The Secret to the Stock Market

Institutions are the driving force behind the stock market. Institutions are pension funds, banks, insurance companies, or mutual funds. These deep pocketed investors have the power to drive the entire market up or down. In order to succeed at investing, it is important to know what institutions are doing. You do not need inside information, or to be on the floor of the exchange to know what institutions are doing. All you need to know is how the relationship between price and volume works.

When deep pocketed investors decide to sell stock you can see it in the price and volume. Steady, consistent declines on heavy volume indicate that institutions are selling stock. When the big players decide to unload shares the market has nowhere to go but down. Often it is the individual investor who is told to "wait it out" that is left holding the bag. The bear market of '00 was forecasted by heavy selling as was the recent market correction we have had in '04. When you start to see consistent heavy volume selling it is time to reduce your exposure to the market.

On the flip side when institutions decide to buy stocks they drive prices higher and their tracks are found in the large volume. Continued upside price action on strong volume indicates that big players are buying blocks of stock. Again, when the big players are buying stock you want to increase your exposure to stocks. Other than understanding price and volume, successful investing takes determination, a willingness to learn and a strong passion for success. Fortunately, there is a huge amount of resources available for individuals to use in order to take charge of their investment success.