Recognize Market Movers to Improve Your Trading
Do you already know the market movers? If you’re not 100% sure what they are and how they affect your price chart, this article is for you!
Whether you are a beginner in the world of trading and investing, or you are a professional trader, this article can help you define your analysis priorities before entering or exiting a market.
In the next paragraphs I am going to explain the following, in detail:
- What are market movers: a complete definition
- Market Mover in detail: what they are and how they influence financial instruments
- Pre Market Mover: how they stand out
- Trading Market Mover and Forex Market Mover: are there any differences?
- Market Movers and fundamental analysis: an inseparable couple
- How to start trading following the market movers
Let's get started right away!
What are market movers - Meaning and definition
Let's start with the basics: what are market movers? Let's see a complete definition:
|By market mover, we mean any event or factor capable of influencing the market and generating a movement|
Market movers today are all the news that give direction and increase volatility in the short term. Prior to their release, the market typically has low volatility.
If we apply the Bollinger Bands indicator on our chart it can indicate this change. The gauge appears in a classic flattened shape, with the top and bottom bands narrowing to form a funnel; this particular configuration causes the market to be compressed. Regardless of the outcome of the day, the trader could take advantage of this particular market condition by using the break-out technique, i.e. by opening the position following the break of support or resistance which ideally correspond to the outer bands.
But let's go back to the main theme: we can, therefore, define today’s market movers as news, events and data capable of influencing the performance of a particular financial instrument. Each market mover can have a different impact and scope, and can be expected or unexpected events.
✔️ Predictable Market Movers include macroeconomic data, expected in precise days and times and easily available on an Economic Calendar. Macro data, central bank meetings and statements, quarterly corporate data, political events and elections are all considered traceable and predictable market movers. It’s essential for every trader to always be prepared for these events.
✔️ Sudden market movers are usually unique events. A striking example is the spread of the Coronavirus in Europe and the USA in March 2020.
This sudden event has shaken the markets deeply, as can be seen from the chart below.
Source: Admirals MT4 SP500 Daily chart (April 5, 2019, to December 10, 2020). Accessed: December 10, 2020. Please note that past performance is not a reliable indicator of future results
What are the trading market movers in fundamental analysis?
As we have already mentioned, today’s market movers are all those events that can move the markets, in a short or unpredictable way.
In the first phase, we can divide the market movers into two broad categories:
✳️ Positive or negative events: data with these characteristics relating to a particular market can influence both upside and downside.
✳️ Events above or below expectations: in this case, it’s news that deviates from a certain forecast, increasingly influencing the upward and downward trends of a given asset (for example, a stock).
Regarding the scope of fundamental analysis, we can define 3 main market movers.
1️⃣ ECONOMIC INDICATORS
By economic indicators, we mean all those data and statistical indicators concerning the performance of a certain economy or a certain economic sector.
Here are the main ones:
- Gross Domestic Product (GDP): GDP is a measure that aims to give a monetary value to the overall size of an economy over a given period of time, usually a year. When we talk about the economy, we typically refer to that of a country, but sometimes also a region (such as South East Asia) or a city. As with many other economic and financial measures, an economic indicator alone is not very informative. However, by comparing the size of GDP, or its rate of change, over a number of months, quarters or years, one can understand a lot about the health of a given economy.
- Employment: this economic indicator shows us the percentage of citizens with work or employment. This is strongly correlated to GDP as it contributes to economic growth. The employment of citizens goes hand in hand with production, consumption and income from taxes. The indicators used to measure employment are unemployment rates.
- Debt/GDP Ratio: the ratio of a country's debt to its productive value over a year.
- Public deficit: also called public deficit, it is the accounting situation of the state that occurs when, during a financial year, the expenditure exceeds the revenue or the state budget is negative.
- Inflation: indicates the prolonged increase in the general average level of prices of goods and services over a given period of time, which generates a decrease in the purchasing power of money.
- Consumption: this figure represents the increase in demand for goods and services. As consumption increases, demand, production and consequently GDP increase.
All these economic indicators are made public by local authorities and you can keep yourself informed about them by keeping an eye on the Forex calendar.
The main European Economic Indicators are the following:
- Eurozone CPI or consumer price index of the Eurozone (EU inflation) - monthly and quarterly
- German Zew PMI or German Economic Sentiment Index - monthly
- German manufacturing index - monthly
- GDP of member countries
- Unemployment of member countries
The main US Economic Indicators are the following:
- GDP or "Gross Domestic Product" compared with annual or quarterly data and issued quarterly by the Department of Commerce.
- Unemployment or "Unemployment Rate" published monthly by the Department of Labor.
- NFP or Non-Farm Payroll, published monthly, is one of the most anticipated indicators of economic growth. The Non-Farm Payroll shares the number of jobs created in the United States in the non-farm sector during the previous month. This reflects the level of activity and the health of the American economy.
- Industrial Production regarding the manufacturing production of companies, published monthly by the Federal Reserve.
- Consumption data or "Consumer Spending" about the trend in consumption data representing two-thirds of economic activity, published monthly by the Department of Commerce.
- Home Sales or "Home Sales" released by the Department of Commerce monthly to measure consumer sentiment and new home purchases.
- Sales or "Retail Sales" published by the Department of Commerce monthly to measure the health of consumption. It represents growth in retail sales.
2️⃣ FINANCIAL INDICATORS
Financial indicators, as far as the scope of states and economic communities such as the EU is concerned, include central bank activity, interest rate trends, inflation, etc.
- The ECB Rate Decision or decision of the European Central Bank on interest rates - quarterly
- US inflation or "CPI (Consumer Price Index)" published monthly.
- All press releases and events related to central banks
At a company level, on the other hand, financial indicators are the indices that in the financial statements provide a detailed analysis of a company's performance, communicating the company's ability to achieve and maintain a financial balance. This data can be particularly useful if we are dedicated to investing in stocks.
In the analysis of a financial statement, the indices that give information on financial performance are, therefore:
▶ ️ leverage (i.e. the ability to respond to one's financial debt in relation to the capital contributed by shareholders);
▶ ️ the degree of financial independence, i.e. the percentage of the asset is guaranteed by own means;
▶ ️ liquidity;
▶ ️ ROI, return on invested capital, i.e. the company's ability to remunerate both its own capital and third-party capital;
▶ ️ROE, return on equity, which determines the percentage of the money invested by shareholders which is remunerated;
3️⃣ POLITICAL FACTORS
Political factors, such as market movers, are probably the easiest to understand and interpret. It’s obvious that a country facing a political election will experience extraordinary market movements.
The most striking example is that of the US elections in November: during the weeks before and after the vote, the financial markets saw great volatility.
Among the political factors that could turn out to be market movers, we can also include:
- Tax policies
- Labour law
- Environmental law
- Trade restrictions
- Political stability
Perhaps the most interesting of the previous points is that of trade restrictions. The trade war between the US and China falls into this category and has generated a lot of movement in world markets.
Pre market movers - How they stand out
What are pre market movers?
By pre market movers, we mean all those events or factors that influence fluctuations on the financial markets that occur before the daily opening on the markets in question.
A pre market mover usually refers to a market mover event that occurs after the close of quotes on the trading day and before the opening of the next day.
As you have probably guessed, ‘pre-market’ refers to the time before the market opens. These movements can occur at any time between the closing and opening of the market.
For example, a pre-market mover sensitive time for the stock market occurs when stock prices are affected by any other trading in progress, during pre- and post-market trading hours. Pre and post-market trading hours occur immediately before the stock market opens and immediately after the stock market closes.
But how can pre market movers help us?
If you take a look at what the stock moves are before the trading day begins, you may be able to position yourself with a significant advantage over other traders.
By making sure you are there to review pre-market movements at the start of the day, you will be able to generate a trading plan for the approaching day that is based on facts and things that actually happened - as opposed to a lesser-informed forecast.
In conclusion, pre market movers are stocks that move while the market is closed. These movements can be the result of trades that took place during post or pre-market trading hours, or even during both of these trading sessions. It’s essential if you want to be ahead of other traders during the day, to find out about pre-market movements and the effect that these will have on the market in question.
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Trading market movers and Forex market movers - Are there any differences?
The Forex market is no exception as far as today’s market movers are concerned: the events and indicators that move the market are the same and also apply to currencies.
Especially when it comes to interest rates and economic data related to a certain country, the related currency can experience major movements on the price chart.
It’s therefore important to keep in mind that all the above events will affect the respective currency:
- All publications related to the US economy will have an influence on the US dollar and consequently on related pairs (EURUSD, GBPUSD, etc.)
- All publications relating to the European Union will affect the Euro and related pairs
- The various national announcements will affect the country's currency and related pairs
Market movers and fundamental analysis - Seasonality
Seasonality in fundamental analysis is a less popular phenomenon than one might think.
But, what exactly is seasonality?
It’s a phenomenon in which, during the course of the year, certain movements in the markets occur seasonally. History repeats itself on the markets. Surely, you’ve already heard this, right?
Let's see below which are the best known seasonal market movers today and consolidated by statistical data in specific financial instruments:
Statistical data, derived from a 50-year study period, identified seasonal patterns in the SP500 index:
- The last quarter of the year is typically bullish
- The month of September is historically the worst month of the year (bearish)
- The best time to invest upwards on the index is from November to April
➰Other market indices
The seasonality in the stock market indices is decidedly uniform: the statistical data highlight the weakness of the markets during the summer months. Let's see the data below.
- CAC40: (from 1965 to 2000) Statistical data show that historically, from November to April the French index rose by 4.557%. On the other hand, from May to October it has fallen by 2.63%.
- IBEX35 (from 1995 to 2011) The statistical data shows that historically, from November to April the Spanish index has risen by 9,117 points. From May to October, however, it has fallen 4.313 points.
- FTSE MIB: The Italian index follows the same pattern. Historically, in the months between November and April, it grows by 14% and between May and October it falls by -3%.
- FTSE 100: The British index grows 14% in the months between November and April and only grows 2% in the months between May and October.
What data can we derive from these statistics?
Historically indices have tended to decline in September - keep this in mind as you review investment opportunities this month.
Over a period of 50 years, if we invested 100 euros and traded only in the month of September, we would obtain a balance sheet of 71 euros, therefore at a loss.
If we had only traded in October, our 100 euros would have increased to 143, in November to 176 and in December to 204.
Warning! All of these statistics refer to upside investments. Remember that with Contracts for Difference (CFDs) you can also invest downward and potentially benefit from historically downward months in seasonal market movers. If you are ready to start trading CFDs you can open a risk free demo account or click the banner below to sign up for a real account:
The market movers statistics can help us establish a pattern, even on a weekly level: let's see below which days it’s best to trade online.
Mondays and Wednesdays are relatively neutral days. Tuesdays and Thursdays are the best days to invest upwards: on these days the markets tend to go upwards. Friday, instead, stands out for being statistically a bearish day.
And are holidays market movers?
➢ In 68% of cases, in the days preceding a holiday, the markets increased by 14 points compared to the average
➢ In 50% of cases, on the day following a holiday, the market increases by 4 points compared to the average
➢ In 74% of cases, the days before the Thanksgiving holiday, the market rises 20 points above the average
➢ In 69% of cases, the market grows before 4 July
➢ In 74% of cases, the market grows before Christmas
➢ In 75% of cases, the market grows before the New Year
How to start trading following the market movers
If this article has given you useful information for your trading strategy and you want to start investing immediately by following the market movers today, here are some tips to keep in mind before opening a real account:
- Open a free demo account to test your market movers trading strategy in a risk-free virtual environment before you start investing with real capital.
- Make sure you choose a broker that is regulated by competent and recognized financial authorities. For example, Admirals is authorized and regulated by the Financial Conduct Authority (FCA) of London.
- Download the platform and get familiar with its tools and functions: it’s essential to have an effective operation! Admirals offers:
- Check the costs related to the trading of your interest! Many brokers hide costs and commissions, make sure you are aware of how much you will have to spend to invest in the instrument of your choice. Admirals is transparent on this front: discover our spreads and commissions.
Once all this is done you can start trading in a safer and more informed way with market movers today! Click below to open a trading account in just a few steps:
Other articles that may interest you:
- Growth Investing - How to become a growth investor
- What Is the Effect of GDP on Financial Markets?
- Understanding Forex Market Analysis
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