Understanding Stock Market Behaviour

Author:

Robert Thomas
Normally shares traded on stock exchanges have prices that are floating or unfixed. This is an important fact to remember when you start trading stocks and shares. The valuation of a company\'s shares is recalculated every time they are bought or sold. Essentially, share prices are an expression of what traders are willing to pay for shares of the company in question.

Profit and Losses

Profits can be made on the stock market by selling your shares in a company for a higher price than they were originally bought for. Note that with modern investment products like shares spread betting you can speculate on the share price of a particular company to fall.

The challenge of stock market trading is correctly anticipating rises in share prices. With spread betting a key challenge is correctly predicting the direction of the market.

If you are trading stocks and shares then you might, for example, buy shares in a company that you believe will become more valuable, in terms of share price, within a two-year timeframe. This belief may be based on your observations of the company\'s historical share price, which may have been rising steadily over time.

If you are correct and the share price continues to rise over the following two years, you should be able sell your shares for a profit. The post-tax profit will typically be the difference in value between the buying and selling price, minus stock broker fees and any taxes that are applied to your profits. If you have incorrectly anticipated a rise in the share price, and you sell at a lower price than you paid then naturally you will incur a loss.

Stock Market Behaviour

The future performance of share prices can be difficult to predict. Historical rises are not, in themselves, a foolproof guide to future performance. The wider market can also have a major effect on share prices.

Bull and bear markets are two of the best known types of stock market behaviour. A bull market refers to widespread investor optimism. This confidence is expressed in a greater willingness to buy shares at higher prices. A bull market or bullish trend in the stock market can drive share prices higher throughout a particular sector, such as the banking sector, or throughout the entire stock market. Of course, you should be careful in bull markets, there are often ‘pullbacks\' or market corrections where prices can suddenly drop.

A bear market, on the other hand, refers to widespread investor pessimism. This pessimism is expressed in a reluctance to buy shares at current prices, helping to depress prices over a period of time. As with a bull market, a bear market can affect individual sectors or the majority of a stock market.

At its heart, a stock market expresses traders\' combined sentiment. Therefore, stock market behaviour can sometimes be seen as irrational with increasing optimism or pessimism that does not appear to be based on any rational explanation. A company may have strong earnings and no indication of future losses. Even so, its shares may fall in value as investors come to believe in future losses.

This takes us to one of the most important aspects of stock market behaviour; sentiments can be self-fulfilling. A belief in future losses can translate into a falling share price, as traders pay less for the shares, which can then result in actual future share trading losses and a rational reason for trading at a reduced share price.

Spread betting is a geared form of investment, it carries a high degree of risk to your capital and can result in losses that exceed your stake. Ensure that it matches your trading needs as it might not be suitable for all investors. Before making any trades, make sure you are fully aware of the risks. Only spread bet with money you can afford to lose. Where you feel it is appropriate request independent financial advice.
Article Source: http://www.articlesbase.com/investing-articles/understanding-stock-market-behaviour-4306995.html
About the Author
The writer is a seasoned financial author offering strategic and tactical trading views on the financial spread betting markets.

Pre-Market Movers

Author:

Nicholas Santiago
This morning the S&P 500 E-mini futures(ES H1) are trading higher by 7.75 points at 8:30 am EST. The stock market seems to be reacting positive as oil is pulling back below $100.00 a barrel. This morning, April crude is trading around $96.85 a barrel. Crude remains the driving force behind every stock market move. Yesterday afternoon when oil prices pulled back below the $100.00 level the stock market indexes actually rallied higher off of its intra-day lows.

Traders and investors will have no choice but to follow oil closer than ever now as the Middle East and North Africa remain in turmoil. The situation in Libya seems to be expanding to other nations in the region. Iraq is reported to have protesters beginning to question the newly formed government in that country. Iraq is the third largest oil producer in the Middle East. Should Saudi Arabia see an uprising or protest by their citizens it would be prudent to expect another oil spike. At this time Saudi Arabia has been tame.

The Asian markets rallied higher last night. The Hang Seng Index(Hong Kong) traded higher by 1.81 percent. The Nikkei 225 Index(Japan) traded higher by 0.72 percent. The Sensex Index(India) ended higher by 0.39 percent. The highly followed Shanghai Index(China) ended the trading session unchanged. When the Asian markets trade mostly higher this is usually a positive for the U.S. stock markets.

At 8:30 am EST the fourth quarter gross domestic product(GDP) was revised lower by the government to 2.8 percent from the originally reported 3.2 percent growth rate. This revision has not had any effect on the future markets.

Stocks that will be in play today will be Boeing Co.(NYSE:BA). Boeing Co. received a $35 billion dollar contract from the U.S. government this morning. Salesforce.com Inc.(NYSE:CRM) is trading higher this morning after beating earning last night. The stock is trading higher by $12.00 to $147.00 a share ahead of the opening bell. Other cloud computing stocks could trade higher in sympathy to Salesforce.com. Traders should watch stocks such as VMWare Inc.(NYSE:VMW), Citrix Systems Inc.(NASDAQ:CTSX), and F5 Networks Inc.(NASDAQ:FFIV) for sympathy plays.

Today is a Friday and rarely do we see or expect a large decline on a Friday. For some magical reason the stock market indexes are usually flat to slightly higher by the closing bell at 4:00 pm EST.



Nicholas Santiago
InTheMoneyStocks.com
Article Source: http://www.articlesbase.com/day-trading-articles/pre-market-movers-4310045.html
About the Author
Nicholas Santiago started trading in 1991. In 1997, he became a licensed Series 7 and 63 registered representative. He managed money for a large, affluent private client group. After applying his knowledge to his client base, he decided it was time to begin teaching those interested in learning his methods. He is an expert in Technical Analysis. He has become an accomplished technician in the studies of Elliot Wave, Gann Theory, Dow Theory and Cycle Theory. In 2007, he partnered with Gareth Soloway to form InTheMoneyStocks.Com and realize his dream of educating others about the truth of the markets.

Investing

EU markets trade positive on Friday - FTSE halted due to technical glitch at LSE. UK GDP deteriorates further - CFD and Spread Betting News

Author:

cityindex
Market Strategist Joshua Raymond of City Index (http://www.cityindex.co.uk/) shares his market insights on the morning of 25th February, including news of a technical glitch at LSE.

'European investors bought back into equities on Friday, continuing a theme that started on Thursday afternoon, helping to lift the DAX and CAC Indices higher by 0.3in early trading on Friday. However a technical glitch halted trading on the FTSE 100, causing another blow in sentiment to the LSE.


UK GDP revised lower In a blow to the UK economic recovery, UK Q4 GDP was revised lower to a contraction of -0.6 going some way to threaten expectations of an interest rate hike in May. We have seen investors come on to buy the pound sterling on expectations that the Bank of England will hike interest rates potentially as early as May. Today\'s downward revision throws a spanner to those works and puts the Bank of England into an even more difficult position.


That said, much of the contraction is a direct reference to the weather problems experienced during the crucial Christmas period and so this revised reading should be taken with a pinch of salt.


In reaction to the GDP revision we saw traders sell out of sterling, which subsequently fell against both the US dollar and Euro.


FTSE halted due to LSE glitch FTSE traders however will be venting fury at the LSE this morning as a technical glitch halted trading on the UK exchange. It\'s yet another glitch to trading and traders, who still remember the same issues that halted trading for some 3 hours in 2009, will undoubtedly be venting fury this morning at the LSE. At a time of uncertainty in the markets, where traders are having to keep on their toes with the situation in Libya, the last thing they need is an unexpected halt to trading.


Traders maintain a close eye on the situation in Libya, but with OPEC and Saudi Arabia seemingly willing to fill any supply gap, tensions have taken a small step towards calm today. The FTSE Volatility Index has also seen its first drop for days, falling 7.8having rallied over 50in the last week and so whilst the nervousness in the market has not dissipated, traders could well start to eye what they may perceive as bargains stock picks with prices having having fallen so much. This will be very important should the FTSE (when the LSE glitch is fixed) and wider European Indices stage a recovery from recent losses.'


Learn to read market movements with charting, technical analysis and free spread betting seminars from City Index. Visit http://www.cityindex.co.uk/ for more details.


Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.


About City Index:


Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.


As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.


We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Visit http://www.cityindex.co.uk/ for more information.


Article Source: http://www.articlesbase.com/investing-articles/eu-markets-trade-positive-on-friday-ftse-halted-due-to-technical-glitch-at-lse-uk-gdp-deteriorates-further-cfd-and-spread-betting-news-4309199.html
About the Author



Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.


As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, spread betting.


We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers spread bet using innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support.


Contracts for differences (“CFD”) trading and financial spread betting carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary. Visit http://www.cityindex.co.uk/ for more information.


Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks. Both spread betting and CFD trading are exempt from UK stamp duty and spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.