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Stock Prices Move Because of Buying and Selling Activity |
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If there are more buyers than sellers, the price will rise. If there are more sellers than buyers, the price will fall. This exhibits the economic rule of supply and demand at its most basic. |
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Stock prices go up when there are more buyers than sellers, when there is an increase in demand, and when the buyers are dominating trading. |
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Stock prices go down when there are more sellers than buyers, when there is an increase in supply, and when the sellers are dominating trading. |
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Stock prices stay flat when there is uncertaintyor call it ambivalence or call it confusion. When there is equilibrium in supply and demand or when neither buyers nor sellers are dominating trading, prices stay flat. |
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While stock prices are just an endless repetition of these three movements, there are endless reasons that motivate someone to become a buyer or to become a seller: earnings announcements, dividends, stock splits, interest rate changes, inflation news, research reports, product introductions, merger mania, legal actions, war and peace, solar flares, desire to get the best price, fear of getting the worst price, and on and on. |
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Any of these reasons may stimulate someone to take action. It is this very fact of so many reasons floating around that leads to so many people every day with exactly opposite opinions. This creates the miracle of our markets! |
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By themselves, however, these reasons will not move the stock price. Only the actual buying and selling activity of real traders with real money will move the stock price. |
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As Gary Anderson, the publisher of EquityPM says: "Focus on what traders do, not why they do it." The point is this: You don't care what the reasons are, you will make your money by trading against what all of those people do! That's where charts come in. Charts tell you very clearly what all those people out there are doing. |
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Here's another question for you: What do you think trading is really all about? Isn't it about matching your wits, education, and experience against the wits, education, and experience of someone else? To be more blunt, aren't you "placing a bet" that there is someone out there who is not as good as you are? |
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