What Are the Main Drivers of Stocks Prices Going Up and Down?

Understanding the intricacies of stocks is essential if you want to foray into trading. In a nutshell, stocks are how corporations raise funds for their operation, and are sold in units called shares through stock exchanges. Shareholders are entitled to a share of the corporation’s profits based on how many shares they own.

Stock prices tend to rise and fall, so a trader must know what factors influence this movement.

» Need more info? Take a look at the fundamentals of CFD stock trading

Main Factors for Price Fluctuations

Economic Factors

The stock market is affected by ongoing macroeconomic trends. For example, low inflation has been found to drive high valuations. A greater national GDP reflects higher investment potential and may increase stock prices.

Industry-specific Factors

Investors track the market closely. When a sector is doing well, and competitor brands witness a rise in their share prices, a corporation’s stock may rise. Companies in sectors like Artificial Intelligence (AI) are currently witnessing a rise.

For a more specific example, take a look at our post about what influences the price of Brent crude oil.

Company-specific Factors

Even within sectors that investors are rushing to, company-specific factors will affect the price of their shares. For instance, shares of large-cap companies have more liquidity than those of small-cap. Greater liquidity may be a desirable factor, which might increase the prices.

Market Sentiment

Getting a feel for market sentiment is like a trader’s sixth sense. Knowing what all the players in the marketplace feel about a stock helps investors accurately forecast whether it might trend upward or downward.

Deciphering the Stock Market's Ebb and Flow

Understanding the main drivers of stock prices rising and falling is essential for any investor navigating the dynamic world of financial markets. These drivers, influenced by many factors including economic indicators, corporate performance, geopolitical events, and investor sentiment, paint a complex picture of market behaviour. By continuously staying informed, employing sound investment strategies, and maintaining a diversified trading account, you can navigate the fluctuations in the stock market with confidence and make informed decisions to achieve your potential financial goals.

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