Different investors have different opinions about what really affects the stock market. There are some saying that the influence of company earnings or the economy or the credit markets have the most effect. While these factors impact buyers and sellers of stocks, in reality they are only a part of a more direct impact on prices. These and many other factors do is change the balance of supply and demand.
The stock prices are the direct reflection of the desirability of owning or selling a stock. Variables such as corporate news, economic news, earnings and so on affect the desirability of owning or selling a stock. Usually, companies have their own targets in earnings and when the company surprises the market with high earnings, demand for the stock will probably bolster. Because of this, the equilibrium of the supply and demand will change.
Many buyers will be motivated to buy. More buyers than the sellers mean that the demand will exceed supply, so the price falls.
As the Price Rises
There will come a point where the stock’s price will rise enough for the sellers will have interest. As sellers attract more sellers, supply will exceed demand and so the price will decrease. By dropping the price, sellers of the stock hope to encourage someone to buy it.
As the Price Drops
The price will again drop at a point where it will entice the buyers to buy the stock and the cycle continuous.
The Price Reaches Equilibrium
There are times that the price reaches equilibrium of supply and demand. When this happens there will be minimal up and down movement. This can be witnessed when the stock price stay in a flat range for some time before some news or event changes the balance of supply and demand.
Who can Affect the Stock Market
The stock market can be moved but only if you trade huge volumes. These volumes are as huge as what insurance funds, mutual funds and banks do. These large transactions will push the prices up or down depending on the number and speed with which they buy or sell stocks.
The key in investing is to find these points or drop and rise. And this is done by analyzing financial statements to know which company is at a discount or overpriced. After doing your proper analysis you must use the technical analysis to see the critical points of buying or selling.