Why Do Stock Market Prices Fluctuate?
The stock market can present an easy and quick opportunity to make your wealth multiply. The main goal of trading on the stock market is to buy stocks and sell them at a profit. This is what results in earnings on the stock market.
One key factor that may hold one back from beginning to trade is the constant fluctuations of the market. You may be apprehensive of trying your hand at trading, owing to the volatility of the stock market. To understand the fundamentals of trading on the stock market, we give you a quick snapshot on how stock prices are led to fall or rise. Once understood, you can begin keeping an eye out for the factors responsible for fluctuation and will, therefore, be able to trade with confidence.
Stock market prices are affected by demand-supply economics. In simple words, when demand for a stock exceeds supply, there will be a rise in the price of a stock. The more drastic the demand-supply gap, the higher the price. For example, when many traders are buying stock X, stock X's price per share will increase. The same is true vice-versa. When many traders are selling stock X, stock X's share price will decrease. When experts refer to market forces or market risks they are referring to this falling and rising demand and supply. Of course, this is just economics 101. It is key to dig deeper and observe the various influences that make people buy or sell shares of a given stock.