It is not surprising that such a complex and multilevel field as trading is under the constant influence of trend-formulating factors. They include both financially significant events and trends that characterize internal processes in the markets. This article will help you better understand the most important groups of factors that influence trading on a daily basis.
Factor 1. Worldwide market tendencies.
There are many trading exchanges in the world, each of which operates independently. At the same time, they are all developing under the constant mutual influence. At the same time, taking into account that some of them open much earlier than others, they become a kind of trendsetters in market dynamics. Thus, when the New York Stock Exchange opens, other exchanges in Europe and Asia are already in full swing. Their dynamics directly affect trading processes in the United States. For example, if Asian exchanges have a bad trading day, similar trends may be reflected in the US exchanges as well, due to which fact it is recommended that traders avoid major decisions that could lead to large losses during these periods.
Factor 2. Economic processes.
Changes in the economic performance of world countries also have a significant impact on trading processes and tendencies. For example, an increase in the value of a country’s currency is likely to lead to an increase in its imports, as local purchasing power will increase. Another example is the growth in interest rates in some states, which creates a high probability of outflow of investment from their markets. Therefore, traders must conduct a thorough fundamental analysis of markets before making financially significant decisions. Trading platforms usually put the most noteworthy financial news in individual sections. For example, the desktop version of MetaTrader 5 (which can be accessed through this link – https://nsbroker.com/desktop-platform) has a “Financial News” section on the “Analytics” tab. It aggregates economically significant news that may affect trading trends in the coming periods.
Factor 3. Opening trading operations.
To a large extent, the dynamics and direction of development of trading trends during the day are determined by transactions that take place immediately after the opening of the exchange. During the first hours, traders already perform numerous operations based on forecasts, fundamental analysis, and even ordinary intuition. Therefore, if you are not sure of the sources on which you want to base your decision-making, it is better for you to wait until the initial wave of transactions subsides, formulating specific trends that will determine the dynamics of this trading day, and then make a decision with the full picture in mind.
Factor 4. Midday decline.
During the day, trading processes show different dynamics. In the middle of the day, transaction levels usually stabilize, as a result of which stock prices fall slightly since all the fundamental determinants of their growth become apparent to traders. Therefore, it is quite possible to buy assets at a lower price after passing the midday. At the same time, in a few hours, the situation tends to stabilize, so it is important for traders to close their positions in time and get all the possible benefits from the midday lull.
Factor 5. Social media posts.
Today, the impact of social media is the same as that of traditional media, if not greater. In turn, it is much easier to post news that will have a huge impact on trading processes and trends there than elsewhere. For example, if a journalist or professional expert in trading with a significant number of followers writes a post or article about a company, then, depending on whether the post is positive or negative, it can increase or decrease the price of this organization’s shares. Sometimes, it is not even necessary for these posts to be written by experts for them to have an impact on markets. Most people remember how, recently, the careless tweets of Elon Musk shook Tesla’s shares and made their value fall to a significant level. Therefore, social media can play an extremely influential role in transforming trading trends, which is why their impact should always be taken into account.
Factor 6. Friday trading tendencies.
Friday is a special day of the trading week as it is a time when many traders close their positions to eliminate equities. The reason for this tendency is their unwillingness to hold positions throughout the weekend and to face the risks associated with this process. To some extent, this practice also affects market processes, as it means that mass sales on Friday afternoon are not linked to certain global trends but to the banal reluctance of players to jeopardize their positions. Therefore, traders who are considering the option of opening positions at this time should keep this information in mind so as not to make ill-considered decisions.
All the above factors have a significant impact on market trends and processes. Undoubtedly, they do not exhaust the list of potential determinants because markets are easily influenced by the whole spectrum of impact forces. However, among all factors of this type, their influence is the largest. Traders who aspire to be successful should always take them into account in order to make the right decisions and not take reckless risks. Trading always requires a balanced approach and never tolerates recklessness. Therefore, before taking any initiatives in this area, you should thoroughly analyze all possible factors that may affect market dynamics.