What Makes Stock Prices Go Up And Down?
Last Updated: Jul -14-2018
Stock prices go up and down because of “supply and demand”. If more people want to buy a stock (demand) than sell it (supply), then the price moves up! Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.
Understanding supply and demand is easy. What is difficult to understand is what makes people like a particular stock and dislike another stock. From my experience in the stock market I like to share four things that affect the constantly changing price of a stock price-
1. Internal events: These are events that occur within the company that affects the company's fundamentals, either directly or indirectly. Examples of internal events would be the release of quarterly financial that are either positive or negative, the signing of a large new client, the imprisoning of the company's CEO, FDA approval of a new drug, or the release of an innovative new product.
2. External events: These are major political, economic and social events that occur in the world that indirectly affect the company and its industry.
3. Market pressure: A third factor is the market itself. While a stock may rise and fall on its own merits, it may also benefit just by being in a "bull market." If more people are investing in stocks in general, and the major indexes are rising, a stock that might otherwise be lackluster will enjoy something of a tailcoat effect. That's why it is always important to not only watch the movements of stocks, but of the major indexes as well.
4. Hype: There are those who promote stocks for gain, either to pump up the price of their own shares or to promote them directly for a fee from the company. Such hype may take the form of positive reports in stock market newsletters, press releases and news reports may cause a short-term spike in stock price.
If you understand this four points, you will know what people are buying and what people are selling. If you know this you will know what prices go up and what prices go down!