Oct 31 2011
What does the market do now?
When stock prices are falling, the question on most investors’ minds is “when will it stop?” But did you know that you can make money when the market is heading down? This is not a secret as almost all traders know (they ought to know!) about shorting. In our stock trading classes, we discuss stock trading strategies that let you short the market. More specifically, we have multiple shorting strategies that apply to any stock. In the midst of a roaring bull market, investors are eventually forced to wonder how long it can last. Since trading began in lower Manhattan and in other major financial centers around the world, individuals have wondered about and attempted to analyze the factors that drive the stock market. What causes markets to move? While there is no one answer, there are factors that are known to have a positive or negative impact on the equity markets, both on a daily basis and over time. Of course these are concepts that are discussed in detail in our stock trading class and it’s important to understand them because it determines whether you make money or not. The more you know, the better off you will be. However, in our stock trading course, we will not focus on material that is not important.
Supply and Demand
Daily stock market movements are largely based on the laws of supply and demand. This means that stock prices will tend to appreciate in value as demand perks up and the supply of stocks for sale decreases. Conversely, if demand for a particular issue is low and the supply or volume of stocks for sale in the marketplace is high, prices will tend to decline. Our stock trading strategies are simple and make use of this simple to understand principle: supply and demand. You will learn all about the stock trading strategies in our stock trading class.
The Overall Health of the Economy/Interest Rates
During flush economic times, investors of all types generally have lots of money to invest. As they put their money to work by investing in individual issues or mutual funds, which often hold positions in dozens and sometimes even hundreds of issues, equity prices tend to rise. On the flip side, during a recession or a period of slow economic growth, investors will be more reluctant or even unable to commit investment dollars. This can lead to a decrease in demand for equities and, by extension, a decrease in stock prices. However, as traders we should be able to make money regardless of market conditions. You will learn such stock trading strategies in our stock trading school.
An example of what can happen to equities when the economy slows can be found in an analysis of the period after the terrorist attacks in New York and Washington on September 11, 2001. In fact, within a few months after the attacks many firms, particularly in the financial sector, fired swaths of employees and, as a result, the economy began to slow. This translated into less investing; the stock market responded by trending lower for the first three quarters of 2002.
Interest rates and their direction can also have a dramatic impact on the economy and the stock market. Lower interest rates stimulate borrowing by investors, individuals and companies. This in turn can lead to economic expansion, an environment in which saving and investing is common. In our stock trading course, we won’t focus too much on the interest rates as they don’t directly tie into out short term trading, but we will briefly discuss the different scenarios. Our stock trading strategies have nothing to do with interest rates, so don’t panic! Our stock trading class is designed to make it easy for people to understand our stock trading strategies.
