How Stock Prices Are Determined Each and Every Day
If you are going to invest in the stock market it pays to understand as much as you can about how it works.
In this sense you should know how the prices of each and every company's shares are influenced by various factors.
One common misconception is that if a share closes on a certain price one day - let's say at $4.
32 for example - that same share should open on exactly that same amount the next day.
In truth it will happen much like this for most of the time.
For example it might close on $4.
32 and open on $4.
31 or $4.
33.
In short the price shouldn't change too much.
But on occasion it will change, and this is very important to understand when it comes to investing in the stock market and buying shares in various companies.
For example the company that is worth $4.
32 per share could end up discovering its board of directors have been unlawfully getting up to something they shouldn't with company funds.
If this is the case and everyone gets wind of it before the market opens, those shares could be worth significantly less than $4.
32 each.
Of course this is looking at the bad side of the coin.
If some fantastic company news breaks overnight those $4.
32 shares could end up starting the following day being worth a lot more.
It all depends on a number of factors that no one can ever really account for.
Supply and demand also comes into play here.
For example let's say the company mentioned above has been going along steadily for some time, its shares never moving much from the $4.
32 region.
Now supposing there are rumors that the company is going to develop a new widget that will revolutionize the world in some way.
Those rumors could result in more people wanting to buy those shares, because there is the potential for a good profit on them in the future.
That potential creates more demand for the shares, and thus the prices will go up accordingly.
If the demand drops off the price of the stock will tend to drop off as well.
So you can see that the daily prices of various stocks can be determined from a number of different factors.
And while you may go to bed thinking your stock is worth a certain amount, it could be a very different picture first thing next morning.
In this sense you should know how the prices of each and every company's shares are influenced by various factors.
One common misconception is that if a share closes on a certain price one day - let's say at $4.
32 for example - that same share should open on exactly that same amount the next day.
In truth it will happen much like this for most of the time.
For example it might close on $4.
32 and open on $4.
31 or $4.
33.
In short the price shouldn't change too much.
But on occasion it will change, and this is very important to understand when it comes to investing in the stock market and buying shares in various companies.
For example the company that is worth $4.
32 per share could end up discovering its board of directors have been unlawfully getting up to something they shouldn't with company funds.
If this is the case and everyone gets wind of it before the market opens, those shares could be worth significantly less than $4.
32 each.
Of course this is looking at the bad side of the coin.
If some fantastic company news breaks overnight those $4.
32 shares could end up starting the following day being worth a lot more.
It all depends on a number of factors that no one can ever really account for.
Supply and demand also comes into play here.
For example let's say the company mentioned above has been going along steadily for some time, its shares never moving much from the $4.
32 region.
Now supposing there are rumors that the company is going to develop a new widget that will revolutionize the world in some way.
Those rumors could result in more people wanting to buy those shares, because there is the potential for a good profit on them in the future.
That potential creates more demand for the shares, and thus the prices will go up accordingly.
If the demand drops off the price of the stock will tend to drop off as well.
So you can see that the daily prices of various stocks can be determined from a number of different factors.
And while you may go to bed thinking your stock is worth a certain amount, it could be a very different picture first thing next morning.
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