What is price fluctuation and why do stock prices change so much
First of all let’s discuss what exactly Price-Fluctuation is. In share market, in an auction of sale of shares, there are many players who bids, and the highest bidder wins the auction and the transaction gets completed. When the demand for a particular type of share rises then the price of that share increases but if the demand goes down then the price of the shares also declines. This is a simple application of demand and supply in the share market. Sometimes the price of the shares goes too down or rises with a boom during some season and that is the price fluctuation. Sometimes there is a surge in suppliers of a particular stock waiting to dump in the market and lack of buyers, which leads to decline in price of shares. There are various reasons to price fluctuation but the core is demand and supply forces in the market.
What causes Stock prices to fluctuate? What is the main reason behind demand and supply?
Now here we list down the various reasons behind demand and supply fluctuation and how do they affect the share prices:
- Breakout of relevant news regarding the company: Sometimes, some confidential and relevant news regarding a product of the company which has a direct impact on company’s reputation gets leaked out and that either shoots up the prices or we see a drastic decline in the prices of share.
- Mind of the buyer: We cannot distinguish between investors, although they might invest in same stock but may have totally different mindset so mind set also plays a major role in the price fluctuation of shares.
- Seasonal factors: Some companies shines in some particular season and during the rest of the year they are just doing fine so this has a huge impact on the prices of the shares.
- Psychological factors: Stock market does not only runs on profit but emotions also drives the stock market. The greed of high returns and the fear of losses influences the stock prices.
- Rivalry or stiff competition: The rival company in that industry also has a major impact on share prices as if the rival company is doing great then it will inversely affect the stock prices.
- Earnings of the company: Like everybody salutes the rising sun, same way when the company is doing well and is having huge profits, everybody shows their interest in the company and try to take full advantage of the growing company, and suddenly when the profits fall, everybody back off. This has a huge impact on price fluctuation.