Newbie Lesson - Why the Markets go up and down?

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It’s very hard to determine the movements in advance.

But we have to understand the basics of supply and demand to see what factors affect them and why people want to buy or sell a certain stock.

Basically, behind the stock price are the supply and demand, which reflects how many people are willing to buy and sell at a certain price.

If more people want to buy a stock than selling it, the price will rise and vice versa.

At this point, you probably ask yourself why people want to buy or sell a stock. This is the million dollar question.

We all have the same information about the company but we make different interpretations. Some will see strengths while other see weaknesses.

We can see this with an example.

Tesla announced its Model 3 on March 31st this year. They filled up the pre-order book with more than 300.000 orders.

What would you think happened to the stock prices?

Yes, you were right! Tesla’s stock price went up to $265,42 from $229,77. A 15% increase the week after the announcement.

This is an easy example but it helps to show you how the power of supply and demand works.

There are several factors to determine the value of a company and indeed the price of a stock, we can summarize them in 3 main points:

  1. Expectations
  2. Financial Statements & Ratios
  3. News and Economic Environment

You can find on Pitly app lessons about these 3 topics.

 

Learn more on the App

 
 
Pablo de Miguel