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What Makes Stock Prices Move Up and Down

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To understand what makes stocks and shares price move you must first understand a few things about the current pricing of a stock. At any given time during regular trading hours a stock has 3 values associated with it. A bid, an ask, and a current price. The bid is the highest amount someone is currently willing to pay for a share of stock, while the ask is the lowest amount someone is currently willing to accept for a share of stock. Each number will usually be shown next to the number of shares the investor is offering or asking for. The price of a stock at any given time is simply the last price a share of that stock sold for. Usually the bid and the ask are relatively close to the current share price. The difference between the bid and the ask is called the spread and it is usually healthier for a stock to have a smaller spread. Now we will talk about what makes the price of stock change. If you have ever taken a beginners economics course you probably remember learning about supply and demand. The concept is quite simple. If there is a larger supply of a product than there is demand, the price will likely drop. If there is a greater demand and not enough supply to match, than the price will probably rise. This is also true with stocks and shares. As was explained in lesson 1, the stock market is a literal market where a product, namely ownership of a company, is bought and sold. This means it runs on similar economic principles. If there are a lot of investors trying to sell a stock, and a much smaller number of investors looking to buy that same stock, the price will of the stock will begin dropping. Let’s look closer at the reasoning behind the price drop by creating a mini-market with five people; John, Jessica, Jeremy, Janet, and Jimmy. We will pretend that all five of these investors own 100 shares of stock in Company A. One day they find out that Company A messed up on a new product and it will be delayed for a year. Four of them decide to sell their shares in the company and put them up for sale. Unfortunately, due to the news, there is only one investor that is interested in buying the stock for its current price. John sells his shares, but that leaves Jessica, Jeremy, and Janet, all with shares they still would like to sell. There is nobody willing to buy at the current price, but one investor has offered to buy at a price $1 lower than the current price. Jessica sells to the investor, and the current stock price adjusts to show a current worth that is $1 less than before. If Jeremy and Janet decide to sell as well, they may push the current price even lower as they seek to find investors to purchase their shares of stock. Sometimes when a company announces extremely bad news you can see the worth of a single share of stock drop more than 50% in a single day. To learn more about the stock market and how to make money with stock try one of our stock market courses! You can learn from and interact with professional traders.
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Text Comments (58)
Jas Mac (1 month ago)
This is real and simple understandable video about share price valuation
EdgyDonut (1 month ago)
Wait so when I sell my Stock is it being sold to the investor or the company?
nono li (2 months ago)
I want to talk to Jon/ John. He's the only one getting the full bang for his buck.
Curtis Tackie (2 months ago)
What happens if there's bad news but you don't sell your share in a company?
In that case you would just hold on to the stocks. The stock could either go back up or they could go down. And if you think it's just a temporary thing, you could even decide to buy more of that stock because it just got "cheaper".
Benjamin Wearne (3 months ago)
You're totally right! Stocks are more of a popularity contest than anything else. Professional traders make money on playing their cards accordingly. Big investors can manipulate the price by buying/ selling large amounts of shares. Then when the price gets were they're happy, they can dump their shares on people that are buying on news and run away with the profit. Sometimes big players will compete with each other. Player A will sell a lot of shares after Player B just bought a lot. So player B will defend their position a few times and buy more shares so that the price doesn't fall below where they bought. This is why support and resistance levels form. Its not by chance. 93% of traders are institutional traders representing banks with big amounts of shares. Only 7% of traders are average people. Big news can make a big player a lot of money that wants to sell a big position.
Patel Vidhu (3 months ago)
Good video on stock prices mechanism.
Venu Dayanand (3 months ago)
If i want the stock trading course then how much should i pay for it?? And i am from india so is the course online ?? if it is it will be easier for me.. How long is the course i mean the duration of the course???
Synthetase2 (3 months ago)
The details seem shaky. I understand how supply and demand affect the price, but in the scenarios I'm thinking of, there's someone who controls the price. If the market price is just the price in the most recent sale, couldn't it be easily manipulated then?
Sam Sam (4 months ago)
It still doesn't make any sense to me .........and this explanation doesnt make sense either.... so if a share is 0.10c, and some seller has put a ask price of $1 and i decide to invest $100 and bid $1 and a trade takes place, so the share price goes to $1 because i was willing to pay $1???? and say you are correct and that's how it works and so if that's the case then how can so many different exchanges have the same or similar price for the same shares/stocks?? what are the chances that on multiple exchanges every one is putting in the same bids and asks??? when you you look at the charts for any share or stock and look at its chart history for last 1 or 10 years etc specially with the candle sticks you see the identical pattern all the time every time as when prices hit curtain lows they bounce up and vise versa when they hit a curtain high. Specially when you look with different chart tools you see every time there is a fall there is a rise and vise versa, so this is proof that the price isn't determined by good or bad news or external factors, or the last price someone willing to pay....i mean how do you explain how with out any reason a share price suddenly goes up 20% in 1 hour drops by 50% then reaches similar highs again, drops again and 24/7 goes through a constant never ending of up then down then up then down never very rarely going straight line and holding the price for more than 30 seconds....who keeps buying high and selling low for the prices to keep going up and down???? no explanation makes any sense
Barlow Brokers (5 months ago)
I have seen stocks plummet 18% without any change in shares. What about when there is 5x or 6x shares sold past average and the stock doesn't budge. There is more to it and no one really seems to have the answers just rhetoric.
Ik kudi Punjab di (6 months ago)
Nice video but tell one thing how one can assume its price movement like where is to see its buyers and sellers so one can buy or sell ???
MadScientistGamerr (7 months ago)
you did not explain how it goes up
MadScientistGamerr (7 months ago)
anyone else think the music was too loud?
Synthetase2 (8 months ago)
This is a surprisingly good video! (except for the music, IMO)
Dank Montages (9 months ago)
So does this mean that if I were to invest 20.000$ In a company Before a big move , for example apple with the new Iphone X , or ford with the new mustang 2018 , I would get a lot more (25.000$) After the big product , or does it mean that because the value of the company would go up , that The ammount of people intrested to invest go up , so then my shares mean less , therefor getting less money?
Joshua Hott (8 months ago)
Dank Montages if the estimated earnings is to beat expected or a new product line (not necessarily a product) is released and follows relatively close avg volume, you can speculate that the price will increased due to investors averaging down or wanting more shares because of the company’s potential to increase because of sales, and increased earnings. I’m terrible at explaining but if you would like to know more just msg me and we can skype.
R S entertainment (9 months ago)
Thanks !!!!!
vaibhav panchal (10 months ago)
jay bharat Sir, i can't get one thing when stock price is suddenly gets fall down ( i.e it comes 500-->490-->480-->450) At this time every body it trying to shell their shock then who are the buyer at this moment. same Reversly it stock price is suddenly getting up (i.e 450-->480-->500). When every body want to buy and a person who has already buyed they keep holding. so who are the seller at this time.. Regards vaibahv panchal
Joshua Hott (8 months ago)
vaibhav panchal when investing a support and resistance line is what is determined by large volume stop loss or take profit orders. It creates an area of “support” and insures investors that a stock has a potential to become undervalued if it fall under its retracement level or support line which is set by banks or large investors losing the potential to short a stock or the majority of investors after a supportive uptrend. When a reputable company becomes under sold with its value, you can dictate a buy order and or a sell order. If you want to know more or Skype msg me back.
The Fluter 123 (11 months ago)
How does the company's progress affect the share price sir
Gritty Mane (8 months ago)
Each company has a limited amount of shares to sell. So, Say a company makes a brilliant new product, there’s no outstanding shares to sell and everyone holds on to theirs. The demand will go up along with the price until shareholders are willing to sell. If I pay $100 and everyone else holds onto their stock at $100, the person looking to buy in will bid on the limited stock. Let’s say $130, I sell and make $30 profit
Ransom Locke (11 months ago)
fluter profit and loss has nothing to do with share price
JakeSlayer1 (1 year ago)
Here's what I don't understand: Why does bad news about the company make investors want to sell in the first place? If the stock price is only ruled by supply and demand, why would anyone care what the company is doing? It's not like it's going to effect the price? That makes no sense to me..
Chief Whip s
Ian Dave Custodio (13 days ago)
+Koala Kontrol Jr Bad news triggers the investors. When there's bad news, investors may think that the company's performance may go down (let's say in terms of profit). With that speculation, investors may sell the stocks they owned to protect their investment, hence triggering the supply and demand. What the company does reflect on their performance (profit/growth/expansion/etc.) and their performance will be the basis of the investors to buy shares or sell the shares they owned.
Koala Kontrol Jr (22 days ago)
+Edoardo Ceron I'm not saying you're wrong, but the question is WHY does it go down when there is bad news? I don't see any correlation between stock prices and what the company does... That's if the stock is solely based off of supply and demand (which clearly isn't).
John Simons (1 month ago)
Not that simple. When people buy, they buy from sellers and when people sell, they sell to buyers. There is always a buy/sell transaction. So what is the factor that moves the price up or down?
Eric Sanders (1 month ago)
Here's something to think about.... if the price goes down when sold and goes up when bought... and it takes a buyer to buy said seller's shares then regardless if selling or buying someone is selling and buying at the same time. Lol.... price drops when bought/sold at an undervalued price and up if bought/ sold at an overvalued price... buy at bid goes down... buy at ask goes up..??
Satinder Rawat (1 year ago)
Your videos is good.
Jonae Sandolph (1 year ago)
yea I need more help on this
Jatin Shah (1 year ago)
Thank You Sir
quiksilvermbd (1 year ago)
Great video! I love the detail you went into about market makers, options, volume, analyst ratings, dilution, capitulation, insider trading, etc..!
Orthuzz Orthuzz (1 year ago)
Okay, i feel stupid now :D great...
A? (1 year ago)
I learned a lot. Thank you
Huri Tabari (1 year ago)
Very helpful
Jacob Rothschild (1 year ago)
Great video, thanks!
Mikaya Oliver (1 year ago)
Is this a separate YouTube channel? Where can I find this channel?
Wealth Hacks (1 year ago)
What do you mean Mikaya?

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