The financial market is a very complex industry that accumulates many different directions such as foreign exchange market, stock market, crypto-industry, etc. the general assumption about the industry is that those who are involved in the market, are having a significant amount of income, which is the main reason why people are becoming interested in it. However, the options are too diverse and choosing the correct industry for your skills and capabilities, as well as for your expectation is the first step that the beginner should take.
However, things get more complicated after that, when choosing the proper industry is not enough for becoming a successful trader. It should also be taken into consideration that the financial market is influenced by a lot of different factors that might change the activities completely, or at least somehow. Being always updated about the events that are going around the financial market and not only, and to properly analyze them, is another important aspect that should be taken into consideration by the trader. The article will analyze the factors or events that influence the financial market in general, which will be utterly helpful for the traders to count on while being involved in the process.
Two ways of analysis
There are several ways for each of the financial market industries that can be used by the trader. To take an example of the stock market, while using the technical analysis, the trader is looking at the stock and company itself, and it compares the revenue, prices of the stock and uses the P/E ratio which will help the trader to assume how the company stock will perform in the near future at least.
While on the other hand, fundamental analysis focuses on the events that are happening externally. Those are the financial statements, product launches, and general trends. This method is easier for the beginner to come up with the proper assumptions, however, based on both ways of analysis, it is more likely to get the proper guess. However, there are some more important events that should be taken into consideration, in order to have a thorough analysis for your future performance.
Those who operate in the international arena, and while we are talking about the financial market, the majority of activities are such, another important factor to consider is the exchange rate. Sometimes, the fluctuation of the exchange rate might cause some troubles, while those who are involved in the forex market might gain an advantage out of it. Many brokerage companies that are involved in the market, have implemented an economic calendar to trade Forex in their platforms, which helps the users to keep up with the latest news and economic developments from the world’s financial market. The economic calendar keeps them informed about all of the market’s major events that will directly affect the exchange rate, thus it helps to make certain decisions.
The most accurate way to start is finding thorough information about the company itself. The factors such as dividends, financial reports, and many others. Also, the factors that might be neglected such as the CEO or board members of the company or the release date of a new product are important factors as well.
This can be categorized under the “fundamental analysis” which is a category that has a very big impact on the company performance, which might happen unexpectedly or develop the events in the opposite direction than previously predicted.
World events, which is a very wide category, are having a great impact on the financial market. General events such as disasters or tough political relations with another country might influence the exchange rate, stock prices of the company, and many others. This is also considered to be the fundamental analysis and one of the easiest but important aspects to be taken into account.
Those world events are easy to have information about, and depending on the severity of them, the proper decisions are easier to make. For example, there were several cases of terrorist attacks in many European cities, which made those who were involved in the financial market think that the exchange rate, due to the stopped financial activities would plummet, and the decision whether to buy the valuable asset or sell it can be made depending on this.
Hype and reports
Hype, which can be created by the company itself, but also by external factors such as blogs, events, exhibitions play an important role in the financial market. For example, if a famous investor, for example, Warren Buffet bought a large portion of the other company’s stocks the whole media would start considering it and there would be a major hype created around it.
However, it is sometimes used to manipulate the market and the decisions are difficult to make depending on it. A very clear example of it is the recent trends that developed in the crypto market. After the announcement of Elon Musk that Tesla would start accepting bitcoin payments, which it did, the price of bitcoin doubled and reached the historical maximum. However, several weeks later, he announced that the company would stop accepting bitcoin payments due to environmental problems, and the price plummeted by 50%.
Exchange rates and inflation
The countries’ economic conditions have major impacts on the financial market. One of the most important aspects is to consider the interest rate because they are constantly adjusted by the Federal Government in many countries. When there are major adjustments made, investors are actively involved in the financial market to make the moves that would be more beneficial for their financial portfolio.