When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?
In: 103
On a Macro scale, a stock price goes down because people will sell for less than it’s listed for. They will do that because they have lost confidence in either the specific stock, or the market as a whole.
If you have a stock worth $100, but no one will buy it from you at $100, and you believe next week it will only be worth $80, then you’ll probably sell it for somewhere less than $100 but more than $80. So if you sell it for $95. Now the stock is trading at $95. You save $15 you otherwise would have lost, and now the stock price is $5 less.
One person doesn’t really make a difference especially when most companies stocks see hundreds of thousands of transactions a day, but when you aggregate all those transactions you can see those trends of people buying over current price (causing the price to go up) or selling at lower than current price (causing the price to go down).
The trick to making money is knowing what a stock will do. Not hard if you really study a company (but of course that’s only one stock), but you can always get dicked over by a market correction or, like now, a recession.
Latest Answers