There are, of course, some stock exchange secrets that are available to everyone. If you will, they are hidden in plain sight.
For example, any investor with a good grounding in market history, economics and economic history will be at a distinct advantage over the rest of the population.
Many of the reasons for market moves relate to much wider macro economic issues. It may be that government debt levels are high, GDP growth is slowing, consumer spending increasing, inflation is rampant or whatever. Each of these and many, many other factors will have a profound influence on a national economy and stock index.
Remember, a stock index is usually a guide to the future. Markets tend to look forward rather than backwards. This anticipation of the future opens a window with which to see business and investment six to twelve months in advance.
Each government issues economic data monthly, quarterly and annually. This can give a great guide to the future outlook. They will release figures that relate to job creation, money supply, inflation, interest rates and much more.
It might not need saying, but there are markets where people bet on the movements of many of these numbers separately from the main indices.
Any worthwhile textbook about finance or economics will help an investor to gauge the impact these numbers may have. This is why I say the secrets are stored in plain sight.
Which number(s) has the most importance will depend somewhat on the actual investment it relates to. After all, some numbers, say rising inflation for example, will be good news for some asset classes and companies and bad news for others. It is up to the investor to try and decide which will be which.
By finding, reading and understanding about 10 or 12 important
books about economics, it will be possible to give yourself a worthwhile
edge in investment matters. Something to remember is that many of the
great minds of economics have also been successful investors. John Maynard Keynes for example, was a brilliant investor and ran what was likely one of the first ever hedge funds for himself, friends and family.
Corporations also release much important data. Again, this is not really a stock exchange secret, but the impact of the information could be huge. These figures might be from banks for example. A bank might report about loan defaults, mortgage lending, house prices, credit card borrowing and much more. Since major banks operate throughout the country, this will offer a useful glimpse into consumer life and spending.
A global oil company will report about production levels, demand, costs, price levels. This has an impact in the commodity markets and to inflation figures. Many of the major oil firms are also the amongst the largest companies quoted on the stock exchange. This means that if they report good or bad earnings, the entire market may seem to move as a response.
The trick therefore, is to be open and ready for information as it arrives. In the modern, 24 hour connected world, this is relatively easy and with the internet, very easy.
Perceptive readers will realise that investment is in large part about the quality of the information available. In fact, renowned author and economist Joseph Stiglitz won a Nobel Prize for his work relating information asymmetry and how it impacts markets.
In short, a good financial education and open eyes will help to reveal many stock exchange secrets to you.
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