[mage lang="" source="flickr"]penny stock prices[/mage]
What is behind the increase/decrease in a stock price?
I know its a supply-demand relationship. But what determines the increments for a stocks price jump?
If you invested $1million in a penny stock versus an expensive stock, would you see the penny stocks price rise faster/higher (assuming there were shares to be bought)? Im trying to understand the mechanics of how the market fluctuates. I keep reading of “pump and dump.” Can one person really “make” a market? Does it have to do with the stocks price or the number of available shares?
I’m new to all of this. Can someone please explain what what makes a stock increase in price? Is it the volume of investors? the quantity of stocks being sold? The amount of money ready to purchase the stock at any given time? Thanks
Stocks increase in price for many different reasons. Past performance when quarterly results are issued. Future prospects. For instance a coal mining company might see an increase after it is found that Global Warming is really a hoax. Or a pharmaceutical company can get FDA approval for a new drug. Even companies who are losing money can see a price increase if the begin to lose less money. You might see this when analysts talk about “cash burn”, how fast a company goes through money. Is it faster than money earned? Sometimes its just perception. If Warren Buffet is looking at a company, so should everyone. Sometimes increases as well as decreases are company specific (Apple IPhone is a hit, Apple increases but not Microsoft, Dell, IBM or HP). Sometimes the changes are industry wide. (Massive storm hits, billions of dollars of destruction, producers of lumber, plywood, concrete, roofing materials, flooring materials, makers of screws and nails will all see an increase)
Expensive stocks usually trade on major exchanges. Part of the requirements of trading there is that you have to file financial information on a regular basis. You can read the numbers for yourself. Penny stocks, trade OTC (over the counter), there are no requirements for financial disclosure. So these companies do not have to tell you what their “books” look like. News can be disseminated through hired PR firms and made to look like objective reporting. It is shaky at best.
For every penny stock that makes it past $5 per share, there are 1000′s that disappear. Can one person make a market? Probably not, but a few in concert can.
Pump and dump happens when someone “talks up” a stock. You can get anonymous emails or snail mails. Special market reports on how a company is about to take off. Filled with past picks and how if you purchased those stocks you’d be rich now. How only you are being let in on this secret. Even an unscrupulous broker talking a bit too loudly on a train in a personal conversation, hoping other will hear. This is pump and dump. The person behind all the talk and marketing has already purchased their shares awaiting for those who rush in on the hot tip. After a small quick rise, the pumper then dumps at a profit. All the news is hot air and the stock price drops to where it was prior to all the talk.
Then there is illegal naked shorting… but explaining it would probably make your head explode.
Hope some of this helps… if you have additional questions.. please feel free to contact me.
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