Poor Performance in Stock Trading. In my opinion, I performed poorly in stock trading due to lack of adequate information relating to trading of stocks. This is because of lack of professional advice on effective stock trading techniques and inability to properly analyze the financial markets. However, I have learned that it is important for an individual to seek professional advice on stock trading before making investment decisions.
Factors Affecting Price Movement of Stocks. There are various factors that may impact the price movement of stocks in the stock exchange markets. Some of these factors are related to the business or firm, industry as a whole, global factors as well as human psychology such as the thinking or attitudes of potential buyers of stocks.
Firstly, business factors such as the total current earnings of the company and forecasted future earnings, strategies for growth and room for expansion of the business may positively or negatively affect the prices of its stocks. For instance, when a company has high annual net earnings, its stock price is expected to be high. Similarly, business with potential for expansion and growth may have their stock prices hike because the investors are optimistic about the success of the business in future.
Secondly, global factors such as economic crisis, oil prices, high rates of inflation, acts of terrorism and political instabilities may negatively affect the prices of stocks of a company. Such factors would create non-conducive business environment which results into poor performance of businesses, hence scaring away investors.
Thirdly, human psychology or thinking of the potential buyers of stocks may negatively or positively impact the prices of stocks. For example, when an organization gets involved in unethical business practices such as increased corruption or pollution of the environment, people will view the business entity as socially irresponsible and thus shy away from investing in its stocks. The expectations of the investors thus determine the demand for the company’s stocks.
Other factors that may affect the price movement of stocks include interest rates charged by commercial banks, economic trends in foreign exchange markets, aggregate demand and supply, earnings per share (EPS) and price/earnings (P/E) ratios of the company and prices of other stocks in the market.
Sensitivity of Stock Values. In my opinion, some stocks are much more sensitive to weak economic conditions because of the nature of the demand and supply of the products produced by the company and economy status of the specific industries in which such firms operate. For example, stock values of firms in the technology industry are highly sensitive because of high chances of obsolesce of technological products like consumer electronics. Similarly, companies within economically stable industries experience less sensitive stock values. Companies that produce basic commodities such as foods and housing facilities also have less sensitive stock values because such products have inelastic demands.