All you want to know but never asked about the stocks and options markets.

domingo, 9 de febrero de 2014

What causes the stock price to rise or fall?

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We have talked in previous articles about the stocks and how we can make huge profits with its buying and selling in the stock markets. Regardless of the company we choose to buy/sell securities, the market is quite changing so prices are constantly changing.

In the stock market shares of many companies are traded and billions of dollars in securities are moved every day. There are a number of reasons why the stock price of a company is changing and therefore tends to rise or fall. These changes reflect decisions made ​​collectively by investors in the market.
The main cause that determines the price of a stock and its variations is based on the demand and supply of buyers and sellers, ie, the number of buyers or sellers determines if the share price goes up or down: a greater number of buyers increases the price, however, the more sellers there are on the market, the price will tend to decrease.

Based on the above analysis we can predict if a stock's price will rise or else go down. If, for example, based on a stock of a particular company, there are a relatively large number of investors buying it we can predict that the price of this share will continue to increase. However, if the number of sellers is relatively large the price will tend to low its value. Based on this simple analysis we have that we can more easily make the decision to buy or sell according to market behavior.

Book value is another factor that can affect the stock prices and thus it can be used for decision making by an investor. This indicador takes into account all assets of the business and its total value, ie its price if all assets were sold.

Another factor that tends to raise the price of a stock are the dividends. These benefits which are granted to shareholders have an added value to the value of the share, ie, if a stock with a value of $50 receives a dividend of $5, its value will rise to $ 55. If the corporation announces the total value of the final benefit, this can increase the number of buyers as they would buy the stock because the company is generating profits at the long term so it can be considered a good investment.

The financial indicators of the company are taken into account to determine the orientation of the share value. The price-earnings ratio is the ratio of the market price per share to the earnings per share of a company. If the result would is lower compared to the global stock market or industry, it can be predicted that the share price will rise in comparison to those levels.

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