Factors that affect the rise and fall of stock prices are numerous. Stock markets are always on the move – either up or down. They are on no account inactive. But you may not be at a position to forecast which stocks will move and when. To have a detailed understanding of the functioning of the stock market as a whole, it is first necessary to know the Bulls from the Bears.

The Factors

Be up to date with the actuality that it is impossible for any person to point the stock market. It is a subject of unconditional options. A lot of factors – economic, political, natural and social have an important role to play in instigating the sudden ups and downs that the stock market experiences.

The factors in detail:

Economic Factors

These are the most important of all the factors that have been affecting the stock market. Unlike the other factors that affect the stock market once in a while, the economic factors can affect stock prices and the stock market as a whole every minute! A lot of economic factors can drastically change the stock market scenario. Factors like upward or downward drifts in currency value are enough to instigate an urgent purchase or sale of commodities. The Government’s fiscal policies also have a lot to do to affect the stock market as a whole, and stock prices individually. Even economic grants or sanctions have a lot of say in a country’s economy and ultimately stock prices.

Political Factors

A lot of political factors also can drastically change the market scenario. Political factors like changes in government, changes in a country’s diplomatic relations with another, and even a foreign tour by a diplomat can have a profound effect on the country’s stock market. We all must comprehend that a country’s economy goes hand in hand with its political stability.

Natural Factors

Natural factors, often classified as ‘Acts of God’ have a definite impact on stock prices. Natural factors such as earthquakes, floods, or any other form of devastation usually have a parametric and adverse effect on the share prices and the stock market en bloc. But these are mostly unavoidable as well as fairly unpredictable.

Social Factors

Even social factors may have an impact on the prices of stock of any company. Factors like strikes, closures, etc all have an adverse consequence on the stock prices.

The solution:

Well, the only solution is to BE CAREFUL! A little watchfulness will save you a lot of money and, more importantly, save you a lot of trouble. Try dealing in Exchange Traded Funds (ETFs). An ETF is a number of stocks grouped together by their themes and traded as a single stock. ETFs normally pay well if vigilantly handled. Never get alarmed and sell when the stock market is dwindling. Stock prices will surely recover over a period of time. You just need to have the patience to wait and observe.

The Bulls and the Bears

Bull Market: A bull market is one which has been showing a consistent upward trend over a period of time. It shows the growing confidence that the investors are beginning to have in their stocks. Such a bullish situation virtually guarantees a future stock price increase.

Bear Market: A bear market is one which has been showing a consistent downward trend over a period of time. It happens when investors are vaguely pessimistic about their stock prices and start selling their shares aggressively. At this instant, no matter what you do, by no means overlook the crucial reality that a share market is never absolutely predictable and may often act in an out of your depth way and not in the anticipated fashion. Always keep your eyes open!

This little article might have helped you in understanding the factors that affect the rise and fall of stock prices.

Source by Micheal James