What influences stock price movements?

[Coxy]

Hello all,

This is my first post on the site after reading many of the threads, there is one thing that I have always wondered and never really fully understood. This is the price movements of a stock price and all the influencing factors that lead to a stock price movement.

Is this purely based on volume of trades or are there other factors that determine the movement of a stock? I hope this isnt a stupid question but would be great to hear all of your thoughts on the determining influence on a stock price movement

Thanks
Coxy

 

[Wysiwyg]

I googled your question and came up with this explanation at About.com

Fundamentals

Sector Changes

Market Swings

 

[Coxy]

Thank you for that referrence, it was a good read.

So my understanding from that is that obviously there are allot of influences on the way a company is viewed, however what it really boils down to in terms of the acutal movement of the price of a stock is that it is purley based on the volume of trades made on a particular stock

For example, if XYZ was heavily sold on a particular day, the price would go down, if it was heavily purchased the price would rise........... Is this correct??

 

[Coxy]

I understand market swings, sector changes etc, but I'm really just trying to ascertain what the end influencing factor in the price movement is, is this the volume traded that is the end impact on price movements?

 

[Sean K]

So my understanding from that is that obviously there are allot of influences on the way a company is viewed, however what it really boils down to in terms of the acutal movement of the price of a stock is that it is purley based on the volume of trades made on a particular stock

For example, if XYZ was heavily sold on a particular day, the price would go down, if it was heavily purchased the price would rise........... Is this correct??

Depends on the liquidity of a stock. If it has a lot of shares on issue (think billions) then it would take a lot of volume for the price to move significantly. A stock with tens of millions on issue will take far less volume to move.

 

[Coxy]

Great thanks for that, so taking into account the liquidity, it is still based purely on volume??

 

[Wysiwyg]

I understand market swings, sector changes etc, but I'm really just trying to ascertain what the end influencing factor in the price movement is, is this the volume traded that is the end impact on price movements?

The end result of the influence is buying and selling.This can be in large or small volumes.

 

[Coxy]

Thank you very much Wysiwyg and Kennas for your prompt responses, you have confirmed what i was looking for.

Cheers
Coxy

 

[AlterEgo]

Supply and demand

 

[tech/a]

Supply and demand

You need look no further.

 

[Coxy]

I've thought about the responses provided and what I have been able to read up myself and I'm still not entirely satisfied with it, I know that supply and demand, buying and selling and volume of trades have an impact on the price.

After all the people I have spoken to and various material I've read over the years I find myself wanting further clarification on the EXACT reasoning and influences that dictate the price of a stock, does anyone know where I can get further detailed advice on this?

I really want to understand full extent of the price movements of a stock, and simply saying supply and demand or buying and selling isnt enough information.

 

[Temjin]

I've thought about the responses provided and what I have been able to read up myself and I'm still not entirely satisfied with it, I know that supply and demand, buying and selling and volume of trades have an impact on the price.

After all the people I have spoken to and various material I've read over the years I find myself wanting further clarification on the EXACT reasoning and influences that dictate the price of a stock, does anyone know where I can get further detailed advice on this?

I really want to understand full extent of the price movements of a stock, and simply saying supply and demand or buying and selling isnt enough information.

You will never get it because one can never attain complete information on the collected wisdom of the market players at any one time.

Sometime, there are no particular "reasons" why stock price moves, at least in the short term. Noises account for some of these movement and you need to realise that almost EVERYONE have different reasons for purchasing/selling stocks. It doesn't have to be rational and it doesn't have to be related to the overall "supply/demand" thing. For example, a guy could buy shares because his neighbour tell him so, or an investment firm could sell shares to pay for redemptions, or some kid is selling his inheritance shares to pay for his ipod purchase.

You should now step back a bit and ask yourself the question, "Why do I want to know the EXACT REASONS behind the price movement of a stock?"

 

[strudy]

There are a number of influences involved. As previously stated supply and demand is one of the greatest.

For if stock is freely available, prices invariably will go down in order to sell/get rid of it. Conversely if the stock is harder to obtain then you will have to pay more for it.

Related to this are the influences of the Emotions, predominately Fear and Greed.As we have witnessed in the past few weeks.

Other influences can be company announcements, depending on how good or bad they are can also determine which way the price goes.

Mind you,I have seen good profit announcements made only to see the stock sold off as the stockholders expected more.

And as for crystal balls,predictions and the like they are only someones opinions on the current facts as they see them.

All I reccomend is for you to do your own research and back your judgements by employing "Stop Losses" to minimise your losses.

Hope this has been of some assistance.

Strudy.

Ultimately there are no guarantees in which way the market will react.

 

[nunthewiser]

apart from the obvious re supply and demand

my lil observation IS follow the volumes they dont lie, tells ya buying , selling , accumulation , games .allsorts

sorry last bit re vols in wrong thread

 

[Wysiwyg]

apart from the obvious re supply and demand
my lil observation IS follow the volumes they dont lie, tells ya buying , selling , accumulation , games .allsorts

sorry last bit re vols in wrong thread

I don`t think you boys get it!

Demand is created by some influence.It is the end result of an influence.

 

[nunthewiser]

I don`t think you boys get it!

Demand is created by some influence.It is the end result of an influence.

my taking re demand .. ppl want the stock for whatever reason , buy stock , price rises, lack of supply but still demand = larger rise

 

[nunthewiser]

but YES you are correct there must be a REASON for the demand originally

 

[cuttlefish]

Coxy - just in case you are after something a little more basic - the price changes constantly throughout the day. The "price" is really just a historical record of the last trade that went through.

There are two queues - a bidder queue and a seller (offer) queue - the queue's are sorted by price first then within each price level its a first come first served arrangement.

A trade occurs when one of the bidders raises their price high enough to match the lowest price seller, or vice versa one of the sellers lowers their price enough to match the highest priced bidder. When that happens a trade occurs and that is now the price of the stock. Whether the trade was for 10 shares or 10 million shares doesn't matter.

So the price moves when there are bidders climbing over each other to buy, pushing the price up, or sellers climbing over each other to sell, pushing the price down.

What motivates those sellers or buyers to enter the queue or to climb over each other is another matter, but if there are more buyers competing to buy than sellers competing to sell the price goes up and vice versa if there are more sellers competing to sell than there are buyers competing to buy, the price goes down.

Thats the basic nuts and bolts of it in case thats what you were after.

 

[Geoff]

Since others have already answered the question properly I feel it's OK to be flippant..

At the moment it seems like stock price movements are decided by someone with one of those pointers stuck to a board with a coloured wheel around it (like in the game of Twister). Each morning someone gives the needle a flick and it lands on +4% one day, -8% the next, and +17% on the third day. Sometimes you're in the green sometimes you're in the red, sometimes by a little sometimes by a lot!


That's a cynic n00b's point of view anyway. I've seen plenty of stock movements that follow the markets overseas or good/bad news for various companies, governments, economies. But I've also seen a number that makes me wonder WTF that came from!

 

[alphman]

lemmings.