Short-term and long-term signals on the forex and stock market
Almost all exchange trading is based on various signals that cause trend strengthening or even reversal.
What could be simpler - some event happened, the price made a reversal and traders opened new transactions in the direction of the trend.
Almost everything can affect the price of an asset, from the financial results of the company and the economic situation in the country, to scandals and rumors related to the management of the corporation.
At the same time, different news affects the trend differently; one news can cause a long-term change in the trend, while another can change the price for just a couple of days.
It all depends on what impact this or that event has - fundamental or purely psychological.
1. A statement about the financial condition of the company and the results of its work for the reporting period. Fall in sales, fall or increase in demand for a certain type of goods, crop failures, reduction in production.
State sanctions against the company, etc.
That is, everything that can really affect production and cause a reduction in profits or, on the contrary, show that the company is developing dynamically and has good prospects for obtaining this very profit.
2. Changes in the economic situation in the country, decrease or increase in economic indicators such as GDP, balance of payments, unemployment, industrial production, etc.
At the same time, the psychological impact is exerted by:
1. News concerning top officials of the state or company management - illnesses, scandals.
2. Terrorist attacks or other events that cannot cause real damage to the economy or production.
Duration of the event's influence on the trend
Depending on the type of event, you can predict how long it will affect the trend; fundamental factors, as a rule, have a longer impact on the price.
For example, if there is a message about a decrease in profits or even losses of a company, then this news will reduce the price of securities for a long time, at least until more optimistic news appears.
The same lasting impact on exchange rates is exerted by reports of GDP , lower inflation and an improvement in the balance of payments.
At the same time, it is difficult to expect that a downward trend caused by the illness of the president or rumors about the divorce of the head of the corporation will last longer than a few days.
After all, these events do not have a strong impact on the economy or the state of affairs in the company itself, and rates decline only under the influence of psychological factors.
How to use this fact in trading?
Everything is quite simple, depending on what event caused this or that trend, you need to plan the duration of your transactions.
If the price changes under the influence of fundamental factors , then we hold the deal for as long as possible until the first call for a reversal.
In the same case, if a trend has formed on the basis of psychological pressure or dubious news, you should not hold it for more than a day.
It is clear that everything depends on the specific situation, but dividing the news into the above categories can already serve as some kind of guideline.