According to sources, Greece and its creditors have reached a bailout agreement. This last minute deal was not expected to happen by many after the drama of the last several months, and the good news for Europe’s economy has already had a big impact across the world. U.S. stocks are expected to rise dramatically this week, and there might even be enough traction to help the Chinese stock market see a little bump up in price. Index futures are already up quite a bit (around 0.6 to 0.8 percent), and it seems like the bulls have the upperhand. Most people expected the Dow Jones Industrial Average to rise by over 100 points Monday morning, and the S&P 500, a much smaller index, was expected to rise by about 15 points.
The first thing to do when an event like this happens is to see if the information applies to your assets of choice. The euro will likely benefit, as will major indices. As a result, other major currencies competing with the euro will likely drop, such as the U.S. dollar, but the businesses backing up major indices within the U.S. will see improvements in price. Friday was a good day for the stock market in the U.S., but after several poor weeks, that was to be expected. This sort of good news is likely to drive prices up even more, at least for the time being. A short term approach is probably the most cautious at this point, if you have the financial resources to take advantage of this adequately. Most people cannot access day trading because of the high cost and legal restrictions, but with tools like binary options and the leverage provided by the Forex market, an upper hand can still be gained over the markets.
Greece was borrowing money mainly from the IMF, and when it was presumed that they would default on their loans, there was a lot of speculation about Greece going off of the euro and Europe’s economy collapsing. The departure of Greece from the eurozone may have happened, but Europe as a whole would quickly bounce back. Greece’s economy isn’t big enough to warrant extreme measures like that. However, as the world waited for any sort of development, it was a natural reaction to pull money out of the markets in order to protect any investments. Short term trading does help alleviate this problem, but the majority of people don’t use this method to grow their money. Instead, most people stick to a buy and hold approach, where going long in price is the only choice and money is kept in the market for months or years at a time. It is a valid approach, but markets fluctuate, and there is money to be made in those fluctuations if you can overcome the cost of doing business. This is why so many short term traders fail, and why alternative types of trading–like the binary options market–are growing in popularity.
There are obvious problems with investing off of news like this. The initial boom of the announcement will die down shortly and prices will fall again once the conditions are right. It’s not a permanent solution. It’s good news, yes, and the overall trend of the markets are upward, but this is a small blip on the overall screen of the world’s economic radar. It is, however, a great tool for short term traders to take advantage of before the exact same reason. There will be a noticeable impact at first, and it might even last a few days. Traders can establish positions and get out before the results are undone. If done right, months worth of profits can be made in just a few days.