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Stock Prices Fluctuate Daily
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And Show No Sign to Remain Unchanged
Not only daily, but almost every minute the stock price will changes.
To me, stock market is just like a voting machine. Stock that have the most votes will beat the market, whereas the one that not popular enough, will be the loser eventually.
The mechanism works democratic way and keep the stock price moving.
Basically, the stocks perform their best, up to investors which one they believe in. Let’s go deeper to understand better.
Demand and Supply
In stock market investing, the stock price falls if sellers overrule the buyers. Conversely, if there are more investors who want to buy the stock than the number of shareholders who are willing to sell their holdings, the price will go up, and up, and up…. As a result, stock prices fluctuate daily.
This is a classic example on law of demand and supply in economics. Next question would be what forces the demand and supply?
Market Psychological Effect
Demand and supply for the available shares to be traded is due to market sentiment effect. Every time investors feel that the stock will not able to meet their expectation, they sell their equities and leave the company.
On the other hand, if they are optimistic of its future growth, they will buy more shares of that stock to get better return on investment. What cause the market sentiment, you may ask.
Unfortunately, there is no single answer to that one question.
However, the most obvious factors are interest rates, inflation, quarterly earnings reports, news on corporate events, crime and fraudulent, energy prices, war and terrorism as well as local and worldwide political stability.
Bear in mind though, when it comes to market sentiment, media is the king.
To make the news popular and gain the most viewers, great things can be interpreted as bad actions sometimes. Therefore, filter the information with extra cautious and do not let media control your investment logic.
Individual Investor Needs
This is the most difficult one to identify but is the most reason why stock prices fluctuate daily. Look, every now and then, investors who buy the stock can have variety of reasons, and that reasons won’t be the same from one investor to another.
They buy and sell stocks according to their strategy and needs on daily basis. The fact is there are traders who make living out of stock trading. Therefore, the price will fluctuate based on their trading activities.
You can’t stop the price fluctuation, but certainly, you can make money out of it.
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