Understanding The Factors That Influence Market Trends

Trends are what investors and traders look at when they are looking at long term profits from the markets. The time frame might be long or short. One might be looking at the trending market or ranges in general. In both cases, one is concerned with the flow of prices and how profits and losses are affected by that. The four main factors that influence fluctuations in the short term or trends in the long term are government policies, speculation, expectations and international transactions.

Effect of government policies

When it comes to free markets, government policies and decisions have much effect. The monetary and fiscal policies have a profound effect on the movements of financial markets. The interest rate is increased or decreased by the central governments like the Federal Reserve in US which in turn leads to slow down or increase of growth in an economy. This is the impact of monetary policy. When spending by the government contracts or increases, it is manifested through changes in fiscal policy. These actions are taken for stabilizing prices or for easing unemployment. Interest rates might be altered or dollars available in the open market might be changed. These are actions taken by governments to determine investment within or outside the country.

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International transactions

The second factor that influences markets is the flow of funds between different countries. The strength of a country’s currency and economy is impacted accordingly. If more money leaves the country, the economy as well as the currency becomes weaker. Countries which export mainly are bringing in money from other countries. The money is then reinvested and can be used to stimulate the financial markets. For more information on How To Survive A Long Term Bearish Forex Market Look Up This Link.

Expectations and speculations

These are integral parts of any financial system. The belief of the politicians, investors and consumers influence the state of the economy. Current acts that are committed help create and shape the future and current trends. Sentiment indicators are often used in order to gauge the feelings of a group about the economy’s state. Fundamental as well as technical analysis help gauge the trend direction as well as where the price rates would be headed in the future.

Supply and demand

The push and pull dynamics are created by investments, currencies and products and their supply and demand in a country. The rates and prices change as per demand and supply. When supply shrinks and demand rises, prices rise. Prices fall when demand is less than supply. With supply being stable, prices fluctuate as per increases and decreases in demand.

These factors are known to create long term as well as short term fluctuations in the market. The elements and how they come together in the creation of market trends needs to be understood. Governments issue mandates that impact transactions in the international scene. When taxes are lowered as well as interest rates it leads to more spending as well as economic growth.


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