Do traders move the economy of the world?
- by Anna K.
We are often saying that traders are the ones who move the economy of the world. But is it in fact true? Are we pushing the economy or is it economy that is shaping our behavior in the markets? Let’s look closer to find out!
1. Traders move the economy.
Sure, we can say that. Of course economy of each country and the world as a whole is a very complicated thing and it is hard to make things that simple, but can we say that as a general idea the markets influence the economy? Sure we can! In my opinion it would be incorrect to say that markets and their participants have nothing to do with economic processes in the world.
For example, look at trade war between the US and China. A lot of traders were scared by the perspectives of falling Asian markets that is why a lot of assets were sold off. And as a result Asian economies and Chinese economy in particular were damaged. The same can be said about the greenback. It is always sold off whenever traders do not like the situation in the United States.
And what does all that selling off do for the world? It shows the overall degree of trust that traders are prepared to display for the particular assets. This theory can be easily seen in the shares’ prices – the ability of the traders’ community to drop the price for the asset as soon as they do not like what they hear or see about it.
Well, here I can say that traders do have the ability to move the markets. All we need is to act together and have a definition of what we want from a trade and from a particular asset.
2. Economy drives the traders.
Of course trading is a two way street. And it would be wrong to say that economy has no effect on the markets. On the contrary. Markets are influenced by the overall state of the economy extremely fast and the effect is long-lasting.
I can even go further and say – economy AND politics and influencing the market.
Take the same trade war, begun by Donald Trump. Pure political pressure, the results of which were instantly reflected in the economy of more than two countries, which in its turn grazed the markets performance of a lot of people and a lot of assets.
And the thing is that we are still dealing with the consequence of that. Just like some of the countries are still not over the financial crisis of 2008. Imagine that – 11 years later they are still trying to get from the bottom.
But we are getting off course. Is economy influencing our trades? Obviously. And the sad part is that we are not going to win in this scenario. We are those who are always going to be left losers and we are the ones who are going to have to adjust to the whole situation.
Will that stop us from trading? Never. We are still going to trade and enjoy the process! That is for sure!