Why Do Stocks Go Up and Down?

Save

Stock movement happens all the time. Some stocks will move more frequently than others, and you may even notice that stocks will tend to move down much quicker then they move up. There are various factors that determine these movements.

History

Some say that the purchase of stocks, or shares of a business, originated in the Roman Empire when purchasing was performed in the way of an individual simply investing into an existing business, and then the owner of the business issued a form of confirmation to the buyer that they now owned a piece, or percentage, of their business. Today, with modern technology and streaming Internet making the purchase of stocks very simple--along with the constant monitoring of the movement of the stock--things are happening much quicker, but the principal of the stock or share of the business remains unchanged: its value is set by the success or failure of the business issuing it.

Identification

A public stock is a share of a company that is being sold on the market. It means that this company has met specific criteria to become listed on a stock exchange, making a certain number of shares available to the public to buy. Some stocks fall into a category called "Blue Chip," which are more valuable than "Penny Stock." Blue Chip reflects larger companies, typically with a proven track record, whereas Penny Stock companies are usually smaller and not as financially stable. When a company goes public, they will offer a certain number of shares they wish to sell and put a starting price tag on them. After they are in circulation, the price will change due to supply and demand. Each time a stock has a movement as viewed in real time, it is followed by a "tick," which is a "+" or "-" sign. The "+" sign means that the very last movement of the stock was upward; the "-" means that the last movement was downward.

Effects

Many factors dictate stock movement and value. As mentioned, supply and demand is the first consideration. As a stock becomes more desired and is bought up and becomes more scarce, the price goes up. This may be caused by an announcement or rumor that the company may be merging with another company and more profits are anticipated; or a company may announce that they will be doing major layoffs because business is slow, which may bring the value of the stock down. A company may let it be known that they are coming out with a new flavored ice cream or special product added to their line they expect will do well. This could easily drive the cost up due to the anticipation of success. Sometimes there is a general scare surrounding the economy that may lead investors to pull out of the market, selling their stock and putting their money into a safer fund, which in turn will drive the price of the stock down since there is now an abundance of stock without the demand. Other instances, in the case of a rumor of a war, for example, companies that manufacture war-related items, such as firearms, may see an increase in the value of their stock since they anticipate more production.

Considerations

Some stocks will typically move slower than others, but not always. For instance, a Blue Chip stock is less likely to move very quickly as a Penny Stock stock. A Blue Chip stock is issued from a company that has a stable track record of general success, and people are much less likely to panic and sell if there is a wave in business. On the other hand, a Penny Stock company may not be able to handle even the smallest wave, and could be put under much quicker that a Blue Chip company, so the slightest problem could cause the quick sale of Penny Stocks, which will drive the price down. Keep in mind that a Blue Chip Stock will also cost you much more than a Penny Stock, but you are paying for supposed stability. In some cases, particularly with a Penny Stock, when a panic arises and stocks are being sold rapidly, they may lose all of their value and flick off the board entirely.

Time Frame

In regards to how quickly a stock will rise or fall, no one can know for sure, but it's wise to expect anything. Even healthy Blue Chip company stock can drop like a lead weight within one day if news comes out that the company may be considering filing for bankruptcy, for instance. On the other side of that spectrum, a Penny stock company may file notice that a new miracle drug to cure cancer has just been approved by the FDA, which could make that stock skyrocket in value instantly.

Related Searches

Promoted By Zergnet

Comments

You May Also Like

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!