Well many people trade in stock market but a very few people know what makes the price of a stock flactuate. What makes it go up and what makes it come down. ?

Well the answer to this question is demand and supply. Share prices change due to supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.

Now the question arises is that what creates demand and supply. The obvious answer is likes and dislikes of people. When people like a particlular company, more demand comes up and the price rises. When people dislike a company more people will try to sell the stocks so there will be more supply than demand and the stock price would fall.

What is difficult to comprehend is what makes people like a particular stock and dislike another stock. This comes down to figuring out what news is positive for a company and what news is negative. There are many answers to this problem and just about any investor you ask has their own ideas and strategies.

The first and the most important factor which makes people think about a company is its earnings. When a compay earns more profits, people want to buy its stock more. No company can survive in along run without profits. Public companies have to report their earnings four times a year. But earnings are not the only factor which controls the price of the stocks. There are many more compilcated terms which effects the stock prices of he companies like P/E Ratio , Chaikin Oscillator or Moving Average Convergence Divergence (MACD).

Well the most importatnt things to grasp about this topic is that -

1 . Supply and demand regulate the stock prices.

2. Price times the number of shares outstanding (market capitalization) is the value of a company. Comparing just the share price of two companies is meaningless

3. Theoretically earnings are what affect investors' valuation of a company, but there are other indicators that investors use to predict stock price. Remember, it is investors' sentiments, attitudes, and expectations that ultimately affect stock prices.

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