HOW DO STOCK PRICES MOVE ?

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HOW DO STOCK PRICES MOVE ? 
The main reason for the increase and decrease in prices of a stock are the market forces. The supply and demand factor leads to increase  and decrease in the stock prices. If the demand is greater than supply the price moves up and if the supply is greater than demand price goes down.
So what is that element which  leads to movement of supply and demand forces?
If there is any news or information which is beneficial for the company more traders will like to purchase shares of that company and the existing shareholders will like to hold the shares  hence this leads to increase in demand and decrease in supply, and the price of the stock goes up.
Similarly if there is any news or information which is not  beneficial for the company traders will not like to purchase shares of that company and the existing shareholders will also like to sell the shares  hence this leads to increase in supply and decrease in demand, and the price of the stock goes down.
FACTORS LEADING TO INCREASE IN STOCK PRICE
Some factors which may lead to increase in price of a stock are:
  • Increase in earnings: if the earnings of the company increases by 20%, the stock price can be up by almost 20% after hours.
  • Launch of a new product
  • Better prospects in the budget presented by the government.
  • Buyback of shares.
  • News of winning a court case.
FACTORS LEADING TO DECREASE IN A STOCK PRICE 
  • Decrease in earnings.
  • No growth  prospects in the budget presented by the government.
  • Dividend declaration on shares.
  • News of losing a court case.
These factors are good for “short term” trade only. Like intraday or short positional trade. There can also be a situation where quarterly profits are high but yearly profits are low. This happens in the final quarter i.e. in march when the company releases the balance sheet. 


Shaurya Gupta
Bcom(hons), Delhi University
Financial Markets(hons), Yale University

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