What affects the stock price of companies and how to use it in stock trading
When starting to trade on the stock exchange, most traders simply determine the direction of the trend and make a trade in its direction.
But this approach rarely gives good results because it is difficult to predict how long the existing trend will last.
It is much more important to know what influences the stock price and what will serve as a signal for the start of a new trend, so that you can be one of the first to enter the market.
In fact, there are quite a few factors that can change the price of shares, but we will try to list at least the main ones.
Factors that influence the stock price:
Profit or Loss – Most investors prefer to buy shares of profitable companies and sell securities of unprofitable companies.
Information on the financial condition of companies is published once a quarter; it is this information that often serves as a signal for the start of a new trend. In addition, in the news you can find forecasts on the performance of a particular company.
Amount of dividends - the higher the amount of dividends paid, the more willingly they buy shares and the more actively the price of the security grows.
Stocks with good dividends rise in price immediately after interest increases and shortly before payments begin.
Split shares - or in other words, splitting existing ones. After a split, the price initially decreases, but after a while, the cheaper securities begin to attract investors, and the price rises.
Therefore, many people prefer to buy shares after the split.
State policy - obtaining government orders for production, adopting laws to protect manufacturers and other similar measures.
Typically, these events result in increased profits, so the appearance of such messages stimulates a rise in the stock price. Often this factor has the greatest influence on the stock price.
Sanctions – directed against a specific enterprise or an entire industry. Such an event literally collapses the price of securities, because it leads to a reduction in production.
An increase or collapse in prices - if an increase in prices for manufactured products occurred as a result of an increase in demand, such an event will definitely form an upward trend.
At the same time, a fall in prices is always a signal to sell and the securities of a company producing cheaper products begin to decline in price
Positive news and negative news - other news reports that are not listed above can also affect the stock price.
This can be either positive news that pushes the price upward, or negative news that literally causes stock prices to collapse.
I hope I was able to answer the question “What influences the stock price”, you just have to wait for the events mentioned above and make a transaction in the right direction.