What Determines the Price of Stock?

There are numerous factors that affect the price of a stock. It can be hard to actually know exactly what drives the market, but there are factors that can drive a price up or down.

Price

We know the basics. The more demand there is for a stock, the higher the price will be. Lower demand usually equals a lower price for a stock. But what drives the demand?

This article is about Price

Let's say that stock LKJ closes on Wednesday afternoon at 26. What will it open at on Thursday morning? There is no real way to predict the future price of a stock. Oh, there are analysts that will try, but there are no guarantees put forth on the predicted price.

What could happen between Wednesday afternoon and Thursday morning? Well, perhaps a major product that the company produces was pulled off the shelves due to labeling problems? Maybe the President of the company was arrested for embezzlement of company funds. Perhaps the company found a cure for the common cold. They could have finalized a deal with a major competitor for a grand merger. You can go on and on about what could happen.

There are so many factors that push a price up or down. But remember, in the end, demand still says what a buyer and seller will accept. This demand is affected by the market, politics and industry news.

Every morning on the stock market is a new day. Consider it a clean slate. Demand can be entirely different than it was yesterday. Stocks that closed really high yesterday could be dropping quickly today. The market goes up and down constantly.

Keep in mind that the price of a share is dependent on what someone is willing to pay for it. A stock might be a great buy for you at per share, but a terrible buy at per share. However, another investor might jump at the price of per share. Who is right about the price of the share? Only time will tell. Many investors once thought Microsoft was overpriced at per share. Time told that they weren't exactly accurate about that.

Successful investors take the time to recognize what the fair price for a particular stock is. They don't jump on cheap stocks just because they are cheap. But they don't rush into overpaying for stocks either. They also keep their investments in check. If the stock is falling along with the sector or overall market, they might sit tight and keep their eye on a good price.

Good investors look at the company and other factors when determining price. As you invest, you will learn the strategies and techniques that will help you establish the fair price for stocks. You learn that you can either find that price or simply move on to another stock that meets your investing goals.

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