A Beginner's trading Guide for those who follow the news and want to apply this knowledge to trading.
In the intricate web of the financial world, the rise and fall of markets are not just numbers on a screen but a reflection of the intricate dance between global events and economic forces.
The interconnected nature of our modern economy means that events happening on one side of the globe can send ripples through financial markets worldwide. Changes in the economy, political situations, international relations, and other outside factors affect the prices of digital assets and the overall market performance.
Today, we navigate the dynamic terrain where world events and financial markets converge, shedding light on how information, crisis, and opportunity intertwine in this ever-evolving ecosystem. By understanding the impact of various events on the market and predicting the fall and rise of financial assets, you will learn how to trade more effectively.
There’s a multifaceted connection between financial markets and global events. Here’s how different events impact the market:
GDP growth, employment data, and inflation rates are all important global economic indicators. Positive economic data improves trust in the financial market, while negative data can cause sell-offs.
For instance, superpowers like the USA and Japan have a thriving economy, boosting their markets. On the contrary, other third-world countries like Somalia and Burundi have poor economic indicators, impacting the financial markets in such countries.
Political events occur daily in every nation, yet certain political events have global consequences. Elections, political policy, and foreign crises may all result in volatility in the financial markets.
For instance, the Brexit referendum in 2016 generated financial market volatility as investors faced uncertainty surrounding the UK’s exit from the EU. As a trader, you must carefully monitor political changes impacting legislation, commerce, or foreign relations.
Pandemics and other health crises can significantly impact the financial market. Such instances generally bring the world to a halt and can make it difficult for firms to operate, cause issues in the supply chain, and make individuals less likely to purchase something.
COVID-19, for example, immediately impacted the market when it was termed a ‘global pandemic’ in 2020. Global lockdowns caused businesses to close and many individuals to lose their jobs. This disrupted the global financial markets by causing supply chain and economic issues.
Natural disasters are catastrophic events that no one has control over. These disasters disrupt normal corporate operations, disrupt supply lines, and alter customer demand. Earthquakes, floods, and hurricanes are natural calamities that have previously shaken the financial markets.
During such events, the index falls for three days: the day of the incident and the two following days. The best action plan for traders in such cases is to avoid trades.
Innovations and breakthroughs that have a global effect can be another event that can affect financial markets. In such cases, the companies behind these technologies tend to face a price surge, ultimately surging the asset prices of other companies associated with their operations.
For instance, Tesla’s rise to fame and breakthrough in the EV sector pushed the price of TESLA stocks and helped its other partner companies achieve a breakthrough.
Digital assets are the latest entrants into the finance ecosystem. They have become an asset class that can be used for risk diversification along with investments in other financial instruments. With platforms like Olymp Trade facilitating ease in trading opportunities with user-friendly interfaces, trading volumes in financial instruments are only going to rise.
This view has fueled the perception of trading in digital assets and correlated it with broader macroeconomic factors.
Here are some factors driving the correlation between the two aspects:
As the maturing digital asset market becomes more interwoven with the financial markets, there’s an increase in the number of institutional investors and derivatives. This allows for digital assets to become more mainstream.
The digital asset markets are still heavily influenced by speculation and liquidity. These factors exaggerate the correlation of macroeconomic events.
Different geopolitical events can cause correlations to surge or weaken as the crypto market responds to new dynamics.
Multiple factors can affect the price of different trading assets. Here’s an overview of some of the most significant factors that stimulate market movements:
Government regulations are a crucial factor affecting trading assets and prices. Changes in regulatory rules can reduce the value of your investment significantly.
Scarcity is another factor that impacts the value of trading assets. The fewer the trading assets, the higher the value, and vice versa.
Market capitalization is another factor that can alter the price of trading assets. The higher the market cap of assets, the higher the price and value.
Predicting the financial market may appear difficult! However, with research and experience, anyone can learn to navigate the challenges.
While asset trading involves risk, having a basic understanding of the financial markets may go a long way. Before you enter the market:
Lastly, consider how global events impact the market, stay updated with the latest market movements, and navigate them using premier trading tools.
Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same.
Disclaimer: This Article is auto-generated from the HT service.
