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Risk associated with future trading
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[QUOTE="Jasz, post: 212194, member: 61772"] Trading is a risky business. Many people have lost a great deal of money in the stock market, and many more people have decided to not invest their money at all because they are afraid of the risks involved. To evaluate these risks, we must first ask why stock prices can fluctuate so much. The answer is that there are a number of factors that can lead to changes in price. Some of these are internal factors and some are external factors, but it's important to note that when determining risk we only need consider external factors. There are three basic external factors: the overall state of the economy, government policy, and the actions of competitors. The economy is easy to understand: when economic activity slows down or fails altogether, stock prices will fall because businesses tend to perform poorly in an economic downturn. Government policy can be either indirect (for example, taxation) or direct (for example, limiting imports), but in either case it has an effect on companies' ability to make money, so stock prices will drop if government policy makes it more difficult for companies to do business profitably. Government action can also take the form of loan guarantees, bailouts, and so on; essentially any time the government injects money into an organizational structure—be it a bank [/QUOTE]
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