How does the stock market really work? I have a few questions?
I want to know how the stock market really works in terms of:
1. Investors Buying & Selling shares; how does the trading volume, here, of individual buys & sells affect a company’s stock price?
2. How can you tell how many people/investors are buying or selling a company’s stock in order to go long or short and put the odds in your favour – is there any specific technical analysis indicator that can tell you this, or what else can?
3. How does news affect stock prices?
1. Individual investors are really only a small percentage of the volume traded daily. Big money like financial institutions, and mutual funds represent most of the volume and therefore are the ones who have a chance to really affect the stock price.
2. Because volume is an indicator of the amount of shares traded, there will be equal buying and selling. I know you want to find out if the sentiment is leaning towards selling off or loading up, and I do not know another indicator than the stock’s price. If the volume is more than 150% of the average volume traded, then there is probably a reason someone is buying or selling, so watch the stock’s price to indicate whether they’re loading up or selling off.
3. News usually has a very large impact on the stock’s prices. The type of news is directly related to the movement in price. So if its bad news, the stock will likely fall, if its good news the stock will likely rise. The problem with making a decision on news alone is that the stock does not always move the way you expected because of news. If a company says they have had a great quarter with high earnings, the stock may not even rise if they expected to have an even better quarter with higher earnings.
How the Stock Market Works for Dummies