why stock prices change
Stock prices predominantly change because of supply and demand, kind of like how a housing market works. This means that if more people want to buy a stock, rather than sell it, the price for a share goes up, because a share of that company is in demand. The same thing works vice versa, if there are more people looking to sell a stock, rather than buying a stock, then the price for a share drops because there is less demand. The supply/demand theory is easy to comprehend, however, what isn't easy to understand is why people like or dislike a stock which translates to either more demand, or less demand.
The most crucial thing that can drive a stock up or down, are its earnings. Earnings are something that will be talked about later, but briefly they are just the profit that the company has made. Profit is quite obviously something a company cannot survive without. Money is what runs a business and this is why earnings have such a big impact. A company reports earnings 4 times a year, known as every quarter. Before this, analysts come together and make a target estimate at what the earnings may look like. If the company beats these estimates, then it is very likely that the stock goes up, if the company cannot beat expectations, then you may see a decline in the stock price. However, you must also be aware that earnings season is not the only time that a stock goes up or down.
News is also a reason that a stock may go up or down, there may be negative news for a company which sends a stock down, or a positive story that sends a stock much higher. Obviously news is something that you cannot prepare for, and this is why sometimes stock prices can change so suddenly.
In conclusion, stock prices change because of supply and demand, but there is no definite answer as to why there might be more demand for a stock at one point at a time versus another. This is why sometimes stock prices can be erratic, meaning you should exercise extra caution when deciding to invest into stocks.
The most crucial thing that can drive a stock up or down, are its earnings. Earnings are something that will be talked about later, but briefly they are just the profit that the company has made. Profit is quite obviously something a company cannot survive without. Money is what runs a business and this is why earnings have such a big impact. A company reports earnings 4 times a year, known as every quarter. Before this, analysts come together and make a target estimate at what the earnings may look like. If the company beats these estimates, then it is very likely that the stock goes up, if the company cannot beat expectations, then you may see a decline in the stock price. However, you must also be aware that earnings season is not the only time that a stock goes up or down.
News is also a reason that a stock may go up or down, there may be negative news for a company which sends a stock down, or a positive story that sends a stock much higher. Obviously news is something that you cannot prepare for, and this is why sometimes stock prices can change so suddenly.
In conclusion, stock prices change because of supply and demand, but there is no definite answer as to why there might be more demand for a stock at one point at a time versus another. This is why sometimes stock prices can be erratic, meaning you should exercise extra caution when deciding to invest into stocks.