4 Factors That Shape Market Trends

Market trends play a crucial role in allowing traders to make profit from trading. In a trending market, the movement of the price is what creates profit and losses. Long-term trends and short-term fluctuations are dependent on 4 major factors. Robert Peter Janitzek gives us an overview of these trends.

Major Market Forces

As a trader, it is important that you understand these major factors as they will dictate how future trends may occur:


Governments hold much sway over the free markets. Whatever fiscal and monetary policy they implement will have a huge impact on the financial marketplace. When interest rates increase or decrease, the government as well as the Federal Reserve has the option to slow down or try to hasten growth within the country. This is called monetary policy. The fiscal policy, on the other hand, involves the increase or decrease of government spending. Robert Janitzek reveals that the fiscal policy can be used to ease unemployment and/or stabilize price. When the government alters interest rates as well as the amount of dollars available on the open market, they can affect the flow of investment into and out of the country.

International Transactions

The flow of funds between countries can dictate how strong the economy and the currency will be. The more funds that goes out of the country, the weaker the economy and currency will be. Countries that solely depends on exports, whether physical goods or services, consistently brings money to their countries. When trading on the forex market, they have the option to reinvest their money which could stimulate the financial market within those countries.

Speculations and Expectation

Speculation and expectation is integral in any financial system. Consumers, investors, and politicians have differing opinions when it comes to the future of the economy which can affect how they will act today, Expectation of future actions will be determined by current acts and will shape both current and future trends. Sentiment indicators are often used for measuring how certain groups are feeling about the current economy. Analysis of these indicators combined with other forms of fundamental and technical analysis can result to a bias or expectation of future price rates and trend direction.

Supply and Demand

Supply and demand for products, currencies, and other investments will result to a push-pull dynamic in prices. Changes in prices and rates will cause changes in supply and demand. When something is in demand and supply diminishes, it will cause the prices to increase. If the increase in supply is beyond current demand, the prices will decrease. A stable supply can cause prices to fluctuate higher or lower and for demand to increase or decrease as well.

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