Increased volatility and its effect on Equity trading is a part of the movement of the world economy. The moving ups and downs of the economy is the reason for increased volatility. The average investor has become reluctant to risk funds on trades. Companies that were once considered rock solid are now on shaky ground in a precarious World economy. The Mom and Pop investor can ill afford to invest retirement funds in a risky trading environment because of increased volatility in the stock market.
The number of company’s failing for lack of funding is on the increase. Operating cost and lack of demand for the product is increasing. National economies due to overwhelming debts are failing; leaving little choice but for some companies to fold; these pressures increased volatility and its effect on Equity trading. Companies in the exploratory fields have mining facilities around the World. Some have raw materials necessary to the products they make coming from places with volatile political situations. When unrest occurs this makes investing in these companies unpredictable. The uncertainty of the economy also makes investing in startup companies less attractive, perhaps hampering the development of promising new entrepreneurs.
The market reacts to interest rates decided upon by governments. If there is a riot in a part of the world or a major catastrophe, this all affects the volatility of trading. Many investors have learned to close out the noise of the market and look at the numbers, basing their reactions on concrete facts but others are still reactive to every circumstance. Still, there are those pressed by the talkers, predicting doom and gloom in order to shift the buying and selling in their favor; sometimes successfully. Any kind of volatility can affect Equity Trading, positively or negatively.
Increased volatility is certainly influenced by computer technology. The use of these products is commonplace among stock buyers; buying and selling instantly. Profits are made quickly and buyers are in and out many times during the trading day. When these buyers and sellers find a lull in the market they sit out, waiting for a profitable return, creating a sharp downturn in market capacity. Access to machines capable of processing volumes of information mixed with the occurrence of human events creates extreme ups and downs in the equity market. With market access available to inexperienced traders a new sector of volatility is added to the trading floor for analysis.