Di Posting Oleh : Crew Blog
Kategori : 2016 COMMERCE FAQ FINANCE INVESTMENTS Q&A stock STOCK BROKERAGE STOCK EXCHANGE STOCK MARKET STOCK TRADING STOCKS
What are the major reasons for a stock price to change? This is quite frequent question that we get from someone who has just started looking into the stock markets. What causes the stock prices of a company to change? What are the major driving factors behind a stock price? Let us answer these questions for you below.
Now, lets say we are interested in buying a share of Google. Why Google is a question that we would already be knowing before making the decision to buy a share or stock of Google. We may be interested in buying the Google stock because of its past performance as a company. Or because we know what Google is planning to do in the next foreseeable future that convinces us that this plan of Google is definitely going to be successful and driving back more money to itself. As a result, we value Google's stock and want to have a pie of that profit. Hence we need to get a hold of as many shares of Google as possible for us to earn the maximum profit.
Now, with this thought we can see why we want to buy Google shares. But alas! We are not the only one who has seen this future. Many other share market traders have watched and understood this too. Now even they want to have a pie of the Google stocks. But there are only limited number of stocks in the stock market and Google is not going to introduce any more new stocks.
So what does this mean?
This means that there is more demand to Google's stocks than there are actually available number of Google stocks. As this demand keeps increasing, even the seller will be hesitant to sell his stocks of Google until he sees more profit for his stock than the current price of the Google stock. As a result, to lure the seller to sell his stock, the buyer of this stock will start offering the seller a higher price than the current market price for each stock!
Following this, the other buyers too start offering one step above the other buyer. This results in a bidding war for the Google stock and ultimately the seller will decide to sell his Google stocks to the highest bidder. Thus, suddenly there is a surge in the price of Google shares!
An exact opposite scenario happens when a company under performs and as a result the stock holders of this company now want to sell of their stocks to minimize their losses. Now if the company is doing really bad in the market without any profit making, the seller will be in a hurry to get rid of his stocks and re-invest his money elsewhere where he can make better profits. Now, when a large number of sellers decides in the same way, a sudden rush is noticed in the market to get rid of the stocks while there are not many buyers to buy these stocks. A clear case of increase in supply of the stocks and lesser demand.
The prices will now automatically starts falling as seller will start offering his stocks for a much lower price than the market price to any buyers out there!
Thus, we can see that the value of a stock can go up or down purely by the market shareholder instincts and sentiments. If he sees value for any company the share value rises, if he sees a company losing, the share value falls below.
One of the major driving force for such market sentiments comes during the earnings reports of each of these companies. As a mandate, every company trading in the stock market are required to report their earnings every quarter of the year i.e. 4 times in an year. Now, if the company announces that it has made a very good profit in that particular quarter, the company's future will look quite healthy and investors would want to continue or buy more shares of the company in the near future. On the other hand, if the company announces a loss in its quarterly performance, the stock prices are bound to plumment. Hence earning reports are a major milestone for stock market trading.
But not just the earnings report, but there are several hundreds of other parameters too that can affect the price of a stock that can influence its investors. Thus, making the stock price always volatile and never a constant!
