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What makes the stock market fluctuate?

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dhanashri academy
What makes the stock market fluctuate?

Stock prices change daily under the pressure of market forces, that is, supply and demand. If more people want to purchase a security (demand) than sell it (bid), the price rises. On the contrary, if the number of people looking to sell this title is higher than the number of people willing to buy it, the supply is greater than the demand and the price decreases.

The law of supply and demand is easy to grasp. What is more difficult to understand is why people want to buy or sell a particular stock? It comes down to determining what constitutes well or bad news for a company. The answers to this question are many, because just about every investor has his own investment ideas and strategies.

The value of the company

The main theory is that the movement of market prices indicates the value that investors attribute to a firm. However, one must not confuse the value of a company with the price of its action.

The value of the company corresponds to its market capitalization, i.e. the share price multiplied by the number of shares outstanding. So, a company that has put 1,000 shares in circulation at $ 100 ($ 100,000) has a market capitalization greater than the one that has 100 shares at $ 500 ($ 50,000).

To further complicate matters, the stock price does not only reflect the current value of the company, but also the expected growth by investors.

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The profit of the company

The most important factor influencing the value of a business is its profit. Companies with outstanding shares (public companies) are required to report their earnings 4 times a year (quarterly).

Stock exchanges pay close attention to these quarterly reports, as analysts base the future value of companies on a projection of earnings. If the results of a company are higher than expected, the price of its action leaps. If they are below expectations, the price drops.

And all the rest

Profit is not the only thing that can change investor sentiment about an action. If that were the case, the world of the stock market would be simple!

Investors have literally developed hundreds of variables, ratios and indicators to try to measure stock market trends. Some like the price / earnings ratio (C / B) are simple, while others are extremely complex (Chaikin oscillator convergence / divergence of moving averages, for example).

Some analysts believe that it is possible to predict the direction that courses will follow. Others think that by plotting graphs and looking at past price developments, we can determine the right moment to buy or sell. The only thing we are absolutely sure of is that stocks are volatile and their price can change extremely fast.

If you have some basic knowledge about stock market than you can better understand the fluctuations. There are so many institutes in India which gives stock market courses India.

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