Trading is fundamentally driven by human decision-making, which is influenced by a variety of different factors. Contrary to what we may initially assume, traders do not make investments based on their belief in an asset’s price – or even their belief about an asset’s future price, for that matter. The most notable factors determining what position a trader will decide to take are their perceptions of what other people believe about an asset’s future performance, and their confidence in this decision. There are many different theories about the investment market. One such theory is the Efficient Market Hypothesis (EMH), which states that it is virtually impossible to “beat the market,” because stocks always trade at their fair value on exchanges. The theory behind this is that market efficiency causes existing share prices to always reflect all relevant information. Hence, this makes it impossible for investors to either purchase undervalued stocks or sell them at an inflated value. It suggests that the only way an investor can possibly obtain higher returns is by purchasing riskier investments. Read more here…

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