Candlestick Trading Blog

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Factors Affecting Stock Market Prices

There are many factors to that affect stock prices. In today's article we discuss only a handful of these factors as there are so many to take into consideration.

News – The news is one major factor when it comes to prices on the stock market. When there is good news about a company, this obviously positively affects its stock price. Conversely, when the news is bad it can ruin the value of stock very quickly. Obviously the overall performance of a company is more important than daily news, or wall street news, however it is important to note that news does affect what happens to stock market prices for a particular company.

Earnings Per Share – Quarterly reports are published by public companies and the information in these reports includes the company's earnings per share, among other information. The earnings per share is one of the most important stock price factors since it directly influences the buying tendency of the market. These reports are mandatory and every investor should make it a habit to read these reports if looking to practice long term investing. 

Price to Earnings Ratio (P/E ratio) – The price to earnings ratio provides an idea of how each company's share price compares it is earnings. Basically, if the price of the share is a lot higher than the actual earnings of a company, then the stock is considered to be overvalued and the price can fall at any time. Conversely, if the price of the share is a lot lower than the actual earnings of a company, then the stock is considered to be undervalued which means that it has great potential to rise in the very near future.

Supply and Demand – This is a more obvious factor affecting stock market prices and it is a very important factor. The price of stock is directly affected by trends in the stock market meaning that when more people buy stock, the price of that particular stock increases. Conversely, when more people sell stock, then the price of that stock will fall. The idea when stock trading is to be able to predict the trends. There are many trading strategies available to investors who are interested. The trick is finding one that works for you.

Market Capitalization – Investors must multiply the stock price with the total number of outstanding stocks in the market to determine the market cap of a particular company. Market cap tells investors the worth of a particular company rather than the price of its stock.

There are many more factors affecting stock market prices. Short term traders versus long term traders all use this information however it is applied a bit differently depending on the investing strategy used. Continue to research other factors affecting stock prices as well so that you have an overall education in the stock market.

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