What Affects Share Prices? — ASXnewbie.com
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What Affects Share Prices?

Share prices go upwards or downwards during a typical trading day.

This depends on the current emotion which is affecting that particular stock at that time. It will most likely be either Fear or Greed.

Fear is usually prevalent in one or two forms.

You have the type of fear the share price is going up and they are frightened that they will miss out on the profits. So traders will chase the price which of course only pushes the share price up further still.

Or alternatively there is the Fear that the share price will be heading downwards and they will be losing what profit they have achieved or that the value of the stock will recede to a level where they will realize a substantial loss. Therefore they panic and sell in droves which only succeed in escalating the downward trend in the share price because of the selling volume which is unleashed suddenly on the market.

Greed comes into play when the price is heading upwards. Not being content with a moderate profit of 10 - 20 % a trader will hang on and hang on hoping for larger gains. Invariably the share price will fall dramatically and as always goes down at twice as fast as it originally went up, if not faster.

Because of laziness or more likely inexperience the average trader has not employed a stop loss to protect or to lock in their profits. Because of this lack of foresight or planning this ensures disastrous consequences and so the cycle of Fear and greed continues.

As always the law of “Supply and Demand” plays an important part in the share price. If stock is scarce and hard to come by then the share price will go upwards. On the other side of the coin if more stock is available for sale than there are buyers then the share price will descend so as to attract a buyer.

Usually if a share price is tracking sideways it is because the buyers and sellers are at status quo and content with the level at which the share price is currently at. Invariably it is either good or bad news which is the catalyst which will determine which way the share price will head in the future.

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