The Australian stock market experienced unprecedented turbulence in the first week of February 2018 when it lost $60 billion. It was a chilling experience for investors at the Australian Securities Exchange as panic gripped investors across Asia going into a mad frenzy to exit the market.
SummaryStock investing is riskyRisk tolerance is vital for investorsMarket psychologyPolitics can affect stock pricesEconomic factors determine stock pricesCasualties are bad for the stock marketUncertainties are part of stock trading and stock investing and investors have to accept that. As fortune favors the brave, you must learn to face courageously when the odds are stacked. You must have a hardened personality to withstand such situations.
The ability to withstand these setbacks and deal with trading risk are important characteristics that you must possess if you want to be successful in this industry.
Investing in stocks can make you rich and successful as long as you are prepared for setbacks and have the courage to come back strong. You cannot become a millionaire overnight and even if you do, be prepared to lose those millions in a flash.
It is essential to understand trading risks first so that once you get used to them, you can expect to make lucrative gains in the future.
Stocks or stocks are considered high-risk assets. This is why you should be prepared to lose money and even capital when investing in stocks.
Investing in the stock market is not for the faint-hearted. There are factors inside and outside of your business that can adversely affect your business. With this you should always be prepared.
Human psychology and behavior affect stock market performance.
For example, the behavior of American investors who chose to suddenly dump stocks and exit the market had a profound influence on Asian investors who acted in the same way. It sent the asx200 shares lower and created a negative effect on the Australian stock market.
Although the incident had a negative impact on the stock market, it is not something you should fear forever. In some cases, investors may realize unexpected windfall gains. That's motivation enough for you to look forward to the good days ahead.
Investors closely follow political parties, especially the ruling party. If they believe that the measures or policies adopted by politicians can harm the interests of investors, they could manipulate investments that can move the market and even shake it.
This is not only true when countries have to go through internal turmoil. Some international political developments like the tense situation brewing between the United States and North Korea are under scrutiny by investors around the world.
If a major trading partner of one country witnesses the formation of a hostile government in the other country, their country's stock market could take a beating. Similarly, the formation of a friendly government there could make markets bullish. Even revolutions and terrorist activities can increase business risk for investors.
The stock market is one of the pillars of the global economy. The movement of stock prices has a direct impact on the economy of all countries in the world.
However, this does not mean that it is the only factor that determines economic growth. Interest rates, unemployment and inflation rates also have an effect on the economy of countries.
Lower interest rates can boost economic growth while inflationary trends can deflate soaring growth. Rising unemployment is stifling market growth while higher employment can help boost economic growth and improve the stock market.
Volcanic eruptions, forest fires, floods and other calamities can have a negative impact on the economy, including the stock market.
If you're prepared to face adversity and have the patience and money to hang around for a long time, these things shouldn't put you off. In fact, the stock market experience can be very rewarding.
See also:How has trade changed over time
