Over extended periods of time, the stock market tends to be a good investment, making money for buyers who diversify and hold onto their stock patiently. Buying and selling stock over the short term, known as day trading when it happens within a single trading day, is a faster and more risky way to invest. You'll need to examine several factors to know how the stock market is likely to change day-to-day.
Stocks and the Economy
The stock market as a whole rises and falls in relation to the health of the global and national economies. This relationship is strong because a slow economy is bad for the companies that individual stocks represent. They will have fewer customers and those customers will have less buying power than during economic boom times. It will also be harder to raise capital in a poor economy, and more expensive for businesses to borrow when interest rates are high.
Several key economic indicators can help predict stock market changes day-to-day. One such indicator is the monthly jobs report. This report includes unemployment figures and indicates whether companies are hiring and if people are finding work. The day before a jobs report that is expected to be strong, the stock market may start rising in anticipation of the news. Confirmation of strong hiring will usually send stocks higher, while a lower-than-expected rise in job creation will have the opposite effect. Announced changes to interest rates, tax policy and industry regulation also effect the stock market day-to-day.
Economic news may influence changes in the stock market, but individual investors are the ones responsible for making that change in the stock market take place. The price of a stock index such as the Dow Jones depends entirely on how much investors are willing to pay for the companies whose stock is included in the index. Analysis of investor attitudes and interests can reveal upcoming changes in the stock market. For example, analyzing online search metrics reveals which sectors of the economy investors are investigating. This data indicates which stocks are likely to see higher demand, and higher prices, the following day.
Read as much reliable financial news as you can to learn about investor trends and attitudes, as well as impending changes to the broader economy. You can access Internet search analytics online through several different free or subscription services. Pool this knowledge with your own common sense and knowledge of the stock market or specific stocks you're interested in. Record your ideas and predictions and compare them to actual outcomes to develop a stronger ability to predict the short-term changes that occur every day in the stock market.