Stock Market | Lessons Learned: The 1929 Stock Market Crash

By about 1925, more and more people were involved in the stock market. Then, in 1927, there was an upward trend of strong prices. This attracted more people to enter the stock market. In 1928, the stock market boom took off.

At this point, the stock market was a place where virtually everyone thought he could become rich. The stock market had reached its climax. Everyone thought he was an expert, and reservations are spoken everywhere. Councils were given by almost everyone. Lesson number one: Be careful with the pitch when the fever is high, and everyone thinks you're a master of the stock market, getting richer every day. Be careful when everything seems too good to be true, and tips are given by almost everyone.

Around this time, the Federal Reserve began raising interest rates. Then in March 1929, the stock market has suffered a mini crash. In the spring of 1929, there were more signs that the economy could be in trouble. Steel production was reduced housing construction slowed and car sales declined. Lesson number two: The increase in interest rates is negative for the stock market. Furthermore, when economic conditions begin to deteriorate, this is another negative.

In the summer of 1929, the market went back ahead, and all the early warning signs were forgotten. From June to August, the stock market reached its highest price ever. Almost everyone thought it was a sky stock market, it would never end. Lesson number three: When the market seems too good to be true, it probably is, and at least a correction is coming soon.

It is important to remember that markets go up forever. What we are seeing here is a classic example of mass psychology in full force. This is human nature at work, with the emotion of greed take over many people. A true get rich quick attitude.

By August 1929, many major stocks were rising in price dramatically. This race is called a climax, and another warning sign of trouble ahead for the market. Lesson number four: When the blue chips, after a sharp rise in prices, make large price gains in a relatively short period of time, this is a warning sign of market coverage.

The stock market peaked in September 1929. At this point, strong sales of high volume began to happen, and became somewhat commonplace. This is an important signal that the smart money is going to market. There were five falls on heavy volume? Throughout September. All this was going on sale a month before all hell broke loose in the stock market. Lesson number five: When the volume of heavy market in general? Begin to mount, it's definitely time to start selling their shares. This is an important warning sign.

The Dow Jones fell by nearly 90% from its peak in September 1929, at its July 1932 the fund. Many people lost all their savings, and more. Knowledgeable traders have seen many signs of trouble, and had plenty of time to exit the market before it really began to hit. Lesson number six: Those who knew the warning signs of the market, and acted, had plenty of time to hit the market, before crashing in late 1929. These warning signs stock market are as valid today as they were then. Always keep an eye out for these warning signs and act accordingly.