Candlestick Trading Blog

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When trying to determine a stock's value before you invest, it is important to understand that a stock's value is ultimately determined by what investors are willing to pay for it. Of course there are other factors as well that determine stock prices that investors must understand before investing in stocks. We will discuss these factors in today's article.  

The main factors that affect the price of stock in the stock market include the following:

Of course supply and demand plays a major role when investing in the stock market. When you price stock you must look at supply and demand knowing that prices will fluctuation continuously. When investing money in stock it is important to know that if there are only a fixed number of shares available for a particular stock, then the price of that stock will rise. The stock is more valuable because the demand is higher and the supply is limited. On the other hand, if a stock a certain stock fails to live up to its expectations then the demand for that stock will drop and the price of that stock will drop as well. This drop in price causes shareholders to sell their shares, which increases the supply and again drives the price back down.

Another important factor to take into consideration when you price stock is market capitalization. Market capitalization is calculated by taking the current price per share and multiplying it by the number of shares a company has outstanding on the stock market. The market cap also refers to the size of the company. There are three categories when looking at market capitalization. These include large caps, mid caps, and small caps. Company's that are large caps are very big companies with a market cap of over 10.9 billion dollars. They are most likely to pay out dividends and they typically have more financial assets to help them in the event of down turn in the market place. Small caps companies have a market cap of less than 2.3 billion dollars and they carry a higher investment risk than mid and large cap companies. Their shares tend to increase rapidly in price however they have fewer financial resources in the event of a down turn in the market. Mid cap companies may or may not pay dividends and they are medium sized companies with a market cap between 2.3 billion dollars and 10.9 billion dollars.

There are many factors to take into consideration when you price stock for a particular company. Even if you are looking to practice technical analysis and aren't particularly concerned wit the fundamentals of a company's stock, it is still important to have knowledge of the stock market basics. 

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