As you can see, what a share of a company is worth on one day, or at one minute, is determined by all investors voting with their money. If investors want a stock and are willing to pay more, the price will go up. If investors are selling a stock and there aren't enough buyers, the price will go down
Understanding supply and demand is easy. What is difficult to comprehend is what makes people like a particular stock and dislike another stock. This can be figured out by tracking what news is positive for a company and what news is negative. The principal theory is that the price movement of a stock indicates what investors feel a company is worth. Don't equate a company's value with the stock price. The value of a company is its market capitalization, which is the stock price multiplied by the number of shares outstanding. For example, a company that trades at rs 1000 per share and has 100 shares outstanding has a lesser value than a company that trades at Rs 50 that has 10000 million shares outstanding (Rs 1000 x 100 = Rs 100000 while Rs 50 x 10000 = Rs 500000 ) the price of a stock doesn't only reflect a company's current value, it also reflects the growth that investors expect in the future. The most important factor that affects the value of a company is its earnings. Earnings are the profit a company makes, and in the long run no company can survive without them. If a company never makes money, it isn't going to stay in business. Public companies are required to report their earnings four times a year (once each quarter). The reason behind this is that analysts base their future value of a company on their earnings projection. If a company's results are better than expected, the price goes up. If a company's results are worse than expected, then the price will fall. it's not just earnings that can change the sentiment towards a stock there are various other factors like the political stability , inflation rate, economic growth etc Investors have developed literally hundreds of these variables, ratios and indicators. Some of them are simple like the price/earnings ratio, while others are extremely complicated with names like moving average convergence divergence . we discuss about them in detail in the future.
Some say that it is not possible to predict how stock prices will vary, but that can be done by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing we do know is that stocks are volatile and can change in price rapidly.
1. Supply and demand in the market determines stock price.
2. Price times the number of shares outstanding (market capitalization) is the value of a company. Comparing just the share price of two companies is meaningless.
3Theoretically, earnings are what affect investors' valuation of a company, but there are other indicators that investors use to predict stock price
4. There are many theories that try to explain the way stock prices move the way and we can discuss about them later.
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