Factors affecting Market Trends

Markets move bidirectional (up or down).  May it be stock, indices, futures, individual stocks, currencies, etc. markets trend to move down quicker than they rise within all time frames (fifteen minutes, hourly, daily, etc). Yet it doesn't matter to a professional trader in which direction the current market moves because his only intention is to extract profit by trading in either direction. But how does the trader know which shares hit big and what to sell?

There is no magic or predictions that can accurately guess the rising and falling markets. Many issues affect the rises and falls. This tendency can be best understood by studying market fluctuation trends. Many­ factors affect prices in the stock market, including inflation, interest rates, energy prices, oil prices and international issues, such as war, crime, fraud and political unrest. This article discusses each factor separately.

Inflation: Inflation is the rise in prices across the board. Over a certain period inflation is good, because consumers are spending more on products. However, if inflation persists for long, consumers pull back and avoid spending. When a consumer spends less investor sell their shares in the companies.   As the demand for the stock decreases, the price of the stock decreases. When this happens to many companies in the stock market, the stock market experiences a downward shift.

Interests Rates: Inflation is controlled by increasing interest rates. The Federal Reserve System increases the interest rates which the banks pay on loan that they from Federal Reserve. In return banks raise their own interests on the borrowers. When businesses don't borrow money to develop that new widget, they tend to grow at a slower rate. When consumers don't buy things and businesses don't grow, companies' profits decrease, causing a stock price decrease. Quite the opposite happens for when Federal Reserve cuts down the interest rates.

Earnings:  When a company reports lower profits, investors lose confidence in the company and sell their stock, which decreases the value of the stock.

Energy Prices: Energy is a daily necessity. Only major changes in energy costs have a significant effect on the stock market.

Oil Prices:  The stock market tends to react negatively to high oil prices.

International and Domestic Issues: War tends to affect the stock market negatively. The same goes for crime, fraud, and domestic or political unrest.

All these factors cause changes in the market. Market tends to rise or fall according to these factors.