CFDs, Politics and Share Prices

Politics and Share Prices

Political factors also play a part in stock prices since the environment in which businesses operate is molded by the government. Politics have a direct effect on international relations, regulations, monetary and fiscal policies, lawmaking, taxation, and many other aspects of the economy.

This, in turn, may influence the ability of a company to do business, the price of base materials, the marketing and distribution process, and many others. All of these factors may have a strong influence on the performance of a company.

For example, the sanctions imposed on Russia by the US and European countries, in light of Russia’s invasion of Ukraine in February 2022, affected many companies’ shares. The British energy company, BP, for instance, dropped substantially due to its sanctions on Russian energy company, Rosneft.

Therefore, the effects of geopolitical tensions can immensely affect the prices of shares.

How Are Share Prices Analyzed?

If you are interested in better understanding the pricing of the shares you choose to trade, you can use technical and fundamental analysis to do so. While you cannot guarantee that your analysis of prices will be precise, you may be able to use the analysis to choose your next trade.

Technical analysis uses past price movements and repetitive patterns in order to forecast future price patterns. While recurrent past prices can often act as a decent indicator for future movements, traders should, however, keep in mind that the market is very volatile and that past results are no indicator of future performance.

Fundamental analysis looks at a company's financials and external factors in detail and is often used to determine the value of a stock and gauge price movements, such as return on equity (ROE), price-earnings ratio (P/E), and relative dividend yield.

How Are Share Prices Analyzed?

Investing in the stock market can be challenging, but rewarding if you know what to do. There are some basic parameters you need to follow to avoid making detrimental decisions. Below are just a few steps that any trader should take before trading stocks. In order to minimize poor trading decisions and be more prepared and educated when it comes to the stock market.

Research the Product

One of the most important aspects when trading stocks, whether you are trading stocks CFDs or trading the underlying asset on the stock market, is to make sure you have done your homework. Some platforms offer economic calendars, trading platform indicators, and charting, which can all be used as aiding tools.

Diversify Your Portfolio

By diversifying your portfolio, you include a wide range of assets and stocks instead of sticking only to one or two types. Diversification allows you to get more access to the market and minimize your losses since you don’t put all your capital into one place.

However, when you choose to diversify within an asset class, you spread your capital across a variety of investments within that class. Instead of buying stock CFDs in just one company, you would buy stock CFDs in many companies of different sizes and sectors.

Therefore, you should consider which type of diversification is meant for you and keep an open mind when it comes to your portfolio.