In the trading markets, one of the most important issues that traders follow is the market trend. In a trading market that depends on exploiting the discrepancies between different commodities, the trend represents the only reliable solid metric to follow. The trends themselves are influenced by other factors in the market. The trends that can be observed in the market are usually either long-term or short-term. These kinds of trends are influenced by four key factors and they are:
- Supply and demand
- Speculation and expectation
- International issues
Let us look at each factor in detail.
1. Supply and Demand
The demand and supply forces in the market can be very influential for trends. All the commodities and services that are offered in a given market have a degree of influence on the market as a whole. Investments, currencies, and money among other items have the capacity to generate a dynamic that has consequences for the price in the market. When rates or prices of commodities shift, so does the supply and demand. The push-pull effects in the market are thus among the most influential factors when it comes to market trends.
2. Speculation and Expectation
In the online trading markets, as well as other trading markets, the issues surrounding the feeling in the market are crucial. The general emotion that is guiding the market can be highly influential when it comes to determining market trends. All the different stakeholders in the markets, including; specialists, politicians, and financial investors all have a huge role to play in the direction the market takes. If there is trust in the market, there is bound to be positive signs in the market in regards to the trends. When there is a negative feeling though, the same will be reflected in the trend. In overall, the sentiments of the different actors in the market are quantifiable and they lead to visible changes in the market.
The government and its decisions also play a key role in influencing market trends. The government has a lot of power when it comes to changing laws and policies of a country. By modifying laws relating to interest rates, for instance, the government can be able to determine the growth trajectory of the country. Issues related to spending are also handled by the government. The government thus has authority over the fiscal and monetary policies of a nation. This makes it capable of influencing the prices in the market and the market trends in general.
4. International Issues
Issues that relate to one countries relationship with the rest of the world are also important in determining market trends. To start with, international trade is a huge factor that influences the strength of the currency and local prices. When assets move across borders, there is an effect on the local economy. Investment flows into the country leads to a stronger currency and this affects its trading value. The opposite is also true for the local currency. Countries that have a strong export market are capable of tapping into foreign currency which can be used to stimulate local growth. Local growth is crucial for a strong financial market.
5. The Contributor Effect
Contributors to the market include investors and traders. Contributors play a big role in determining market trends. This is because of their role in influencing the levels of investment and the general policy that guides the government. Contributors have the capacity to predict the situation in the market and they use their insights to shape trends. When contributors are convinced with particular aspects of the market, they can determine the trend of the market for many years.
Trends come as a result of what is happening in the market, what is expected to happen in the market, and what has happened previously in the market. The key factors that influence the market trends are discussed above in detail. These determinants are both influential in guiding decisions of stakeholders in the market and they are also crucial for determining economic strength. The prices of commodities and services are the key factors that ultimately shape the trend in the market. All the factors that cause changes in the market are ultimately tied to the prices of commodities.