Why does a price of a stock go up and down?

The price of a stock goes up and down for a number of reasons. The price of a stock changes depending on the supply and demand for that stock. Stock prices also change when the value of the company offering the stock changes. These changes are not always clear. Some stock changes are directly linked to actually financial losses, while other changes are simply due to changing investor perceptions. These changes are explained in more detail in the paragraphs below:

Supply and Demand - When people want to buy a stock there is a demand for that stock. When people want to sell a stock that is the supply. If there are more people who want to buy a stock than there are people who want to sell a stock, then the price of that stock goes up. The value of that stock increases as supply decreases. If there are more people who want to sell a stock than there are people who want to buy a stock, then the price of that stock goes down. The value of that stock decreases when demand decreased.

Investor's Worth - Understanding what makes people decide what stocks are worth more or less than other stocks is more difficult than simply understanding the relationship between supply and demand. Every investor has their own strategy that incorporates the two theories listed below.

• Actual Value - The actual value of a company can be measured with numbers and presented in spreadsheets and diagrams. For example, in the investment world a company's market capitalization or the company's "Actual value" is the stock price multiplied by the number of shares outstanding. Outstanding shares are shares that have been issued and are currently owned by share holders. The more high priced outstanding shares the company has, the greater its value is. Price movement can be monitored with reports on annual profits and earnings. Companies that have gone public (have outstanding shares) are required to publish a quarterly report and an annual report of its earnings. When the company is making money the stock become more valuable and the price (along with demand) goes up. If the company is loosing money or failing to make financial improvements, the value of the stocks decreases (and supply increases).
• Perceived Value - Perceived value is a huge contributor to stock movement. For example, a company could be making money but if it isn't at the expected rate, their stock value can go down. Each investor has their own perceptions of what makes a particular company worth investing in. Expected growths and actual growths can be completely different. Surprises of new and exciting companies cause investors to become encouraged to buy. A disappointment when company progress is not at the level it is perceived it should be at discourages investors from buying and may encourage then to sell. Sentiments, attitudes, and expectations carry a lot of weight in the stock market and lead to its unpredictable and even volatile nature.

No one can ever know for sure what the market is going to do. Because investor opinions cannot be measured or predicted no one can say for a fact what makes the price of stock go up and down. If the stock market could be made into an exact science, everyone would invest and no one would ever loose money. But we know that this is not the case. The only thing that can be said for sure is that the stock market is unpredictable. Prices can change at any moment. Wisely preparing and actively managing your investments will most likely lead to long-term gains.