Stock prices are determined by supply and demand forces. Supply is the number of shares that are offered for sale at a given moment. Demand, however, depends on the willingness of investors to buy shares.
Both demand and supply may fluctuate depending on various market factors. Let’s look at how the following elements affect the stock price:
Increase in demand;
Fall in demand;
Drop in supply.
The increase in demand for a given share results in an increase in their prices
The demand for shares may increase when the company announces better than expected profit for the last quarter.
The increase in the supply of shares causes their prices to fall
The supply of shares may increase when, for example, the shares of a given company are removed from the popular stock exchange index.
Demand for shares may fall as investors get bad news about a given company.
The decrease in the supply of shares causes their prices to rise
Stock supply may fall when the company buys its own shares on the market. Enterprises with surplus free funds, which believe that their shares are underestimated, often decide to buy their own shares, which reduces their supply and thus indirectly affects the price increase.
Since you already know how demand and supply affect the price of shares, you also need to understand what, or rather, who is changing the size of demand and supply.