Why is the market falling

Why Share Prices Rise & Fall - The Relatively Simple Answer!

It is not uncommon for investors to stand perplexed in front of the market price displays and wonder why some stocks are rising in value and others are falling in value. Sometimes the stock market seems to have no logic whatsoever, but that's only at first glance.

This little article is intended to give a first insight into the complex system of the price development of stocks.

Article content

The basic idea for determining the courses

shares climb on course if there is more buyers as a seller there.

you fall, if more sellers are in the market as buyers.

Malicious tongues say prices rise when there are more stupid (shareholders) than papers (stocks) and they fall when there are more papers than stupid in the room.

In fact, when many investors want to buy, prices go up. That is the basic rule of business.

Prospects and assumptions decide pricing

Shares are coveted when the prospects for the company are good. If the money is cheap and available in sufficient quantities, many investors buy stocks in the hope of increasing their wealth.

On the other hand, the prospects are bad because z. For example, if war is looming or a recession is weakening the economy, investors generally prefer to sell the majority and wait for better times.

In severe crises, panic selling occurs because many market participants are afraid that the economy could collapse.

Basically, there is an optimist in every share trade who hopes for rising prices. On the other hand, there is a pessimist who cannot imagine that the paper will increase in value. This is true in most cases, but there are exceptions.

Special factor: obligations of professional investors

Speculators who aPurchased or sold by appointment and have to close out their positions. Such deals can significantly distort the market.

If z. If, for example, a number of speculators have bet on falling prices, but share prices rise, they still have to buy them at the latest on the due date at higher prices.

The price of stocks will continue to rise as a result, although there is no fundamental reason for it.

Similarly, stocks are also bought for the future because market participants are hoping for prices to rise. If this does not happen, the papers will not be bought and the contract will be canceled upon payment of the difference.

The writer of the deal, i.e. the person who sold the shares in the future, will usually sell the respective paper if he holds it. As a result, more stocks are thrown into the market and the price decline accelerates.

One tip at the end

Why stock prices go up and go down for the same reverse reasons should be made clear in this article.

A little tip at the end: Stock markets often rise when there is a lot of money in the market.

And a lot of money comes into the market when interest rates are low and the economy picks up.