What determines the price of the stock?
The value of a stock is determined by several factors. First of all, stock quotes are affected by the current ratio of supply and demand in the market. If the total number of buyers wishing to invest in a particular company exceeds the number of sellers, the price of shares will increase. Conversely, if stock sellers dominate, quotes will fall.
In addition, the current profitability and capitalization of the company matter. Public corporations provide periodic financial statements to investors. Changes in financial indicators, such as revenue, profit, capitalization and expenses, compared with the expected and forecasted values can significantly affect stock prices.
Current trends in sectors of the financial market may also have an impact on the dynamics of the value of companies. With a constant increase in demand for electric cars in the world, this industry, as well as related industries, will be most attractive to international investors. The most striking examples of such trends in 2019 are the price of Tesla's shares and the price of Palladium, the metal used in the production of electric and hybrid cars. As of November, the price of the precious metal has increased by almost 40% since the beginning of the year, reflecting the growing trend in demand for electric cars in the world. Accordingly, the value of shares in companies in this sector also increased.
For Forex traders, such indicators of stock market quotes as the change in the price per day in per cent and the total trading volume will also be indicative. As a rule, strong price fluctuations, breaking through of technical support or resistance levels occur along with a jump in trading volume. Conversely, during a period of low volatility, a relatively small change in stock prices will be observed. Some stock indices have their own volatility index. For example, the S&P VIX (Volatility Index) displays the level of price fluctuations in the total value of 500 companies included in the Standard & Poors index.
Since the shares of companies are traded on certain exchanges that have established hours of trading sessions, the closing prices of the previous day may differ significantly from the opening prices of the current day. Such cases are possible when fundamental events occur during the time between trading sessions that affect the level of supply and demand. There may be so-called gaps in the price chart, they can be positive or negative depending on the direction of the market movement.