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Trough

A trough is a phase in an economic cycle, market cycle or a business cycle representing the change over from down cycles to up.

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Expanded Definition

A trough is a natural part of economic cycles (including business and market cycles). Just as the economy can have boom times it can also have busts. In fact some economists believe that in order to have boom times you must have periodic busts accompanied by creative destruction. The trough represents the lowest point of the cycle. It is preceded by a recession (contraction) and flowed by a recovery (expansion). As the saying goes "all good things must come to an end", in this case the trough marks the end of bad things and the beginning of good things.

The trough takes its name from its apparent shape when graphed on a chart. A trough often resembles a rounded U shape. Troughs are considered to be highly desirous to just about everybody involved in business. To business owners troughs, if spotted, can give sign to start spending on capital improvements again. To market timers a trough represents the optimal buying opportunity as a bull market should follow shortly.

Investors ought to take heed of trying base their decisions around bottoms as they can devlishly tricky to spot as they happen (although usually they are readily apparent in hindsight). Investors may wish to consider the age old adage that is especially appropriate in this case "Bulls make money, bears make money, pigs get slaughtered."

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