The behavior of markets and investors, market decision making, and the dynamics of supply and demand in a given market cannot be determined with precision one hundred percent. However, in the past, great minds have designed various techniques and theories that help investors to take a particular buying decision or make logical choices. These theories and techniques help today's investors look into the future and make near-impeccable predictions regarding future market behavior and ongoing trends. A layman considers an investor's decision-making to be solely based on speculation, but in reality, every move an investor makes in the market today is backed by sound calculations and theories. Two of the most talked about essential theories or concepts related to market dynamics that will be discussed at length in this article are efficient market theory and behavioral finance. Efficient market theory suggests that in every financial market the flow of information is very efficient and this is reflected in the price of the stock at which it is traded. As we know, the stock price floating in a market does not only depend on the printed company name and company information in the balance sheet and other publicly available financial statements (Baghestani, H., 2009 ). In fact, government and political stability, inflation, interest rates, Treasury bonds and several other factors determine the price at which a particular stock is sold or purchased. Information on all these factors is always available to every investor in the market, whether it is the buyer or the seller. Moreover, this information is available in an effi...... middle of paper ......formation regarding market dynamics and if this is true, then a financial market can never collapse. However, in the real world we face events like that of the 2007 global financial crisis which significantly slowed global economic progress and once prosperous economies like the United States ended up in a state of of panic where poverty has exceeded all previous levels and unemployment has reached intolerable levels. Additionally, interest rates in the United States fell to a staggering 1% during this crisis, leading to a decline in savings in the economy. We can therefore conclude that efficient market theory presents a weak argument for defining market dynamics. However, if a combination of efficient market theory and behavioral finance is used to predict market dynamics, then this will be defined as an efficient and effective approach..