Factors Which Influence Stocks
A number of factors influence the movement of stock prices. The world is now a global village and each market is interlinked in some fashion or the other to one another. The implications of this for day traders and those indulging in spread betting are significant. Any economic development or news regarding a particular market has the capacity to influence movement of stocks in other markets.
Recently, the down grading of Ireland, Greece and Portugal and before that the failure of Dubai in making some repayment created some ripples in various stock markets in the world due to the fact that foreign institutional investors have positions in different markets and will take a flight to safety should they feel there is some danger to their positions. This will create a cascading effect in the market where they choose to exit from and that is how many traders have lost significant money due to leveraged exposures in futures as well as margined trading.
It is not only events globally that shape or influence stock movements. Specific industry activity, change in government policy towards certain industries, company performance or news related to it, economic data of the country as well as any political events can also influence the stock market and that is why exposure to leveraged or margined trading can become a liability, wherein you are taken by surprise and if you have taken long positions on some stocks, you can suffer huge losses if the news flow is negative and the market tanks.
Also remember that stocks move down far faster than they rise as due to panic selling, people just want to liquidate positions and that can pull down a stock price pretty rapidly. The importance of stop losses and guaranteed stop losses emerges in such scenarios as you will at least be able to stem the loss and get out of your positions. When you do select a spread betting trading platform, it is important to ensure that guaranteed stop losses can be fixed and the system supports it so that your interests are protected to some extent.
Despite the above mentioned risks, the popularity of spread betting is on the rise thanks to more and more people getting easy access to trading platforms and the fact that they cannot always spare the money or capital required to trade in larger quantities of stocks in the physical market.