In stock and forex trading small rise and fall of prices can result in very big gains and losses. Although there are many long-term and short-term price controlling factors which are widely discussed by experts and traders, often very small things causes big differences. Interestingly most of these things follow some patterns and are predictable. Below is a list of these small stock trading things that makes big differences in your profits and losses.
- January Effect: In order to reduce the capital gains taxes in trading, traders tend to buy under-performing stocks in January. This causes excess selling pressure before January and excess buying pressure after January.
- The Days of Week Effect: Although makes not much sense, different days of a week have different market sentiments. It is observed that Fridays have more positive market movements than Mondays.
- Small Firm Effect: It is observed that small firm stock outperform their big counterparts. The fundamentals and growth prospective of small firms are usually better than established larger companies.
- Price Reversals Effects: The effects cause under-performers to outperform and out-performers to under-perform. This is because over time the over popularity stock makes the stock overvalued and less profitable and vice versa. So price reversals become imminent.