Stocks go up because more people want to buy than sell. When this happens, they begin to bid higher prices than the stock is currently trading. On the second page of the same coin, stocks go down because more people want to sell than buy. To quickly selling their shares, they are willing to accept a lower price.
That said, we'll take a look at the various reasons that cause traders to want to buy or sell a stock.
It is possible to see the accounts for a company and determine what the company is worth. Investors who take this approach is said to explore the company's "fundamentals". They try to find an undervalued stock - one that is trading below the "book value". They feel that sooner or later, other traders will realize that the company is
worth more than the current price and start bidding it up.
Other investment psychology called "technical approach". This is when dealers closely examine diagrams of the stock's past performance to find trends which they believe will be repeated in the near future. These traders also look at what happens in the market as a whole tries to anticipate the effect it will have on an individual stock.
Sometimes the companies trade at half their "book value", while other times they may trade at double, triple or even higher. When this occurs, can create some sudden and large price swings. This volatility is what makes it possible to make large profits on the market. It is also responsible for large losses.
The stock market is basically a giant auction where ownership of large businesses for sale. If some investors believe that a particular company will be a good investment, they are willing to bid up the price. For the same reason, since many investors want to sell a stock at the same time, supply exceeds demand and the price will fall.
Watching the stock market can be likened to see a ball bouncing. It goes up and comes down and then goes back up. This can be very frustrating for many investors who wish to move up a constant pattern. It is this volatility in the market as a whole and in individual stocks that experienced traders profit from. In the absence of a mass experience, needs, the individual investor, a documented source of information and direction. The daily stock market recommendations from www.stock4today.com can supply this need.
Many investors (as opposed to traders) have a "buy and hold" philosophy. This would work well in a growing market. Unfortunately, the stock market does not go up in a straight line. There are ups and downs that work against this type of investor. Today, many investors have become "traders" who buy and sell on the fluctuations in the market and individual stocks. These traders make money in any market - up or down!
Another well-known investment www.fool.com website lists the following reasons for stocks to go up and down:
Why Stocks Go Up
* Increasing sales and profits
* A great new president hired to run the business
* An exciting new product or service is introduced
* More exciting new products or services are likely
* The company lands a big new contract
* A major review of a new product in the press and on TV
* The company will split its stock
* Scientists discover that the product is good for something else
* Some famous investors to buy shares
* Lots of people are buying shares
* An analyst upgrades enterprise change her recommendation from, for example, "buy" to "strong buy"
* Other stocks in the same industry go up
* A competitor factory burns down
* The company wins a trial
* More people buy the product or service
* The company expands globally and begin selling in other countries
* The industry is "hot" - people expect big things for good reasons
* The industry is "hot" - people do not understand much about it, but they are still buying
* The company was purchased by another company
* Can it be bought by another company
* The company will spin off part of itself as a new company
* Rumors
* For no reason whatsoever
Why Stocks Go Down
* Profits slip, sales slip
* Top executives leave the company
* A famous investor sells shares in the company
* An analyst downgraded its recommendation of the stock, maybe from "buy" to "hold"
* The company loses a major customer
* Lots of people are selling shares
* A factory burns down
* Other stocks in the same industry go down
* Other company introduces a better product
* There is a supply shortage, so not enough of the product can be
* A large trial is filed against the company
* Scientists discover that the product is not safe
* Fewer people are buying the product
* The industry used to be "hot", but now another industry is more popular
* Some new law could harm sales or profit
* A strong company comes into business
* Rumors
* No need to
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