Understanding what makes the Stock Market Move Up and Down
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Finance
May 17, 2007
Mikahamilton
Understanding what makes the Stock Market Move Up and Down
Successful investing requires more then just a little bit of know how and a dash of luck. It requires a cool head, an analytical mind, and the ability to make quick money decisions. This is especially true when investing in the stock market. Investing naturally comes with a level of risk. The market's activity fluctuates on a daily basis during the opening and closing bells. Generally the stock market is supposed to grow in value over a period of time. This growth is actually an average of all of the stocks included on the market. While some may have increased in value throughout the day, other stocks will have fallen in value. In some cases growth can affect whole sectors. A sector is a bloc of companies involved in a specific type of business. Movement in the market is affected by a number of different factors. News reports affecting a specific industry can cause investors to want to increase their holdings, or negative news can cause investors to exit as quickly as possible. These however, are not hard and fast rules. In some cases favorable news can result in lower stock prices as more investors try and sell their shares then are willing to buy, once the stock price falls, it can rise quickly again as even more investors are interested in "buying low". According to analysts, the erratic movements of the stock market can sometimes be attributed to the large number of inexperienced and amateur investors. This can cause the irrational behavior sometimes seen. Mass panic has been blamed more then a few times for making the market move in directions that completely contradict normal rules of behavior for the stock market. Amateur investors have a tendency to make decisions based on press releases or rumors that is sometimes not even related to the value of a stock itself. Other causes could be the activity of day traders. Day traders usually trade in such large volumes that they can affect a stock's price either negatively or positively. Still other ways the stock market can be swayed is by a coutry's attempt at correcting inflation. Usually raising or lowering the interest rate does this. These rates are an indicator of the financial situation for a country. If rates are either raised or lowered, the market activity will usually be influenced. Some companies are able to increase their individual stock prices by releasing quarterly reports showing they have met or exceeded their profit forecasts. Also releasing information about new products or technology that can increase that particular sector's value. Conversely, if a company reports that they fell short of profit projections, the value of that companies stock will usually go down as investors sell off some or all of their stocks. Large shifts are usually due to overreaction to changes in risk. Without the assistance of a professional, the market can be an unforgiving venture for the casual investor. This trend has begun to change due to better resources being available to investors on all levels. Research is a must for any investment.
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