3 Types of Market Movers and How to Analyze Them

Market movers are important tools for those who trade or invest with a speculative approach. Knowing their role and the impact they have on markets is fundamental to navigate and act as protagonists, without being overly affected by the inevitable price fluctuations. How to use market movers? Before answering this question, it's good to provide an overview of market movers themselves, and then move on to a simple and useful classification.

What are market movers

Market movers can be considered analysis tools, but they are actually events. That is, events capable of moving the price. Normally, asset prices are determined by exchanges, or the interaction between investors. However, often and willingly, what happens outside also has an impact, which cannot be predicted or even anticipated by studying the market from a scientific point of view, i.e., with technical analysis. Market movers cannot be ignored: they are "powerful" and frequent. Therefore, a trading strategy should take their presence into account. There are various types of market movers. The classification criteria are also numerous. They can be divided by predictability, strength, or affinity to this or that market. Below, we provide a selection of "types of market movers," taking all these criteria into consideration.

Generic market movers

These are market movers that affect all markets. That is, the market in its broadest sense. They are not necessarily events of epochal magnitude or profound impact. However, they have the character of generality. This type includes, for example, data concerning the economy and finance at an international level. The Fed's monetary policies, for instance, influence all others and consequently all markets. Data on the economy of a large agglomeration of nations, such as the European Union, as well as data at the international level, can be considered generic market movers. However, this category also includes market movers that recur, in specific variants, in all markets. For example, the relationship between supply and demand is different for each asset, but it applies to each asset. Another example is given by the quarterly reports of companies listed on the stock exchange. Each company has its own, but all securities are "moved" by this market mover.

Specific market movers

This is probably the most important class of market movers, the one that should be taken into consideration the most and studied with the greatest commitment. It includes all events that concern that market and only that market. Due to this exclusive link, they are often profoundly impactful. For example, changes in interest rates for Forex, or a natural disaster for the commodity market. And again: automotive industry data for the automotive market segment, and so on. Fortunately, a good part of the specific market movers are "expected," in the sense that they repeat with a certain cyclicity, although differing in outcome. The reference is clearly to economic appointments focused on the publication of this or that data.

Extraordinary market movers

Finally, there are extraordinary or rare market movers. In the first case, they generate a very high impact, bordering on the absurd. In the second case, they are simply infrequent. Extraordinary and rare market movers are very difficult to manage. Most of the time, it's a matter of riding or avoiding a gigantic wave that wipes out analyses and forecasts and risks dragging many investors with it. The simply rare ones, then, come unexpectedly and risk finding investors unprepared. The most extreme form of this market mover is the black swan. This is an event so impactful, unexpected, and dramatic that it often irreversibly changes the game. Just think of Covid. No one imagined it, except for specialists and with vague contours, yet it came and changed the world. Just look at the movements of the indices in the period March-September 2020 to understand the importance of these market movers.

How to use market movers

Once this broad overview of market movers has been made, all that remains is to ask: how to use them? A manual could be written on the management, use, and exploitation of market movers. Here we will limit ourselves to providing some advice. For example, reviewing upcoming market movers, among those scheduled, of course. After that, multiple scenarios are arranged, and an action plan is set for each of them. It will be relatively easy to behave accordingly once the market mover has occurred. And if the market mover is extemporaneous, sudden? If it seems to move the waters too much, it's good to wait, if not even hypothesize a temporary exit from the market. If, on the other hand, it appears manageable, at least potentially, it's good to acquire as much information as possible and give rationality to one's protective action.