How does the share price of a stock go up or down - beyond supply and demand?

Question

Ok. I understand that when people buy shares of a stock it drive the price up and when they sell it goes down. Supply and demand. What I do not get is how the price actually changes. Is there someone at a computer monitoring the buys and sells and adjusts the price accordingly? How do they know how much to change the price? People say earnings is one of the largest contributing factors that affect the stock price. Ok so if the earnings are higher than expected then people will see more value in the stock and buy it and the price will go up. It is not the actually earnings surprise driving the stock up is it? Or is it a guy at a computer deciding what a stock is worth based on what he thinks is the highest price people will buy it for or the lowest price people could sell it for?

Answer 1

Every force that impacts a stock price will directly or indirectly impact supply and demand, whether government legislation, an act of God, competitive advances, etc., etc.  

Answer 2

The guy behind the computer, so to speak, is the market maker.  And on the NYSE its the specialist.  They offer to buy and sell at a certain price and investors make the decision.  In the short term news and current events cause price changes.  In the long term it is the risk of future cash flows that determines the valuations and prices.

http://www.investopedia.com/terms/m/mark...

http://www.investopedia.com/terms/s/spec...

Answer 3

All of those things are factors, but you left out a very important factor that drives stock prices - perception and fear.  They can often override reality, and make stock prices go up or down for no other apparent reason.

I'm still an amateur in the market, but the more I learn, the more I realize I don't know.  If I knew the magic formula for determining stock prices, I wouldn't be here answering questions - I'd be a billionaire on a beach somewhere.

Answer 4

thanks for the link - sounds interesting. I think i see what you're asking. It has to do with the "bid" and "ask" prices quoted. If I want to buy a stock at a "limit"price, I'll enter a bid- if mine is the highest bid, thats what you'll see listed as "bid", until someone meets my bid &sells to me at my price, or I get impatient and raise my bid, to take the "asked" price. If I buy all the shares at the "asked"price, then the next higher asked price will show, until they're bought, and so on all day.

     It's usually best to always use "limit" orders - a "market" order means that you'll buy for whatever the "ask" is, or sell for whatever is bid. A low trading volume stock can have a big difference ( spread). Notice the difference between bid and ask during the after-hours, or most options.  Sometimes you'll see .01  bid and 2000 ask. Hate to trade that with "market" orders.

     Investopedia is a handy online dictionary/encyclopedia of investing terms. good articles, too.  

     your link seeems to be using "value" criteria, with a "stock screener". Etrade has a stock screener, that you can select your own criteria. Value investing can be risky, when companies have to keep changing the value of their investment holdings , as they've been doing a lot, lately. I'm much happier now that I emphasize a good record ( & prospects!!) of earnings -the CANSLIM  method . Bill O'neils book " how to make money in stocks" is a good source, and has a lot of chart reading and market history tips.

    The market maker is one of the people who post's bids and asks ( they're required to post at least one of each - not nescesarily a good one). They "make a market" because they're always willing to either buy, or sell. They make money from the "spread". search investopedia for "market maker" and "scalping"

Answer 5

its basically just supply and demand.  at any given point there are people that want to buy and sell stock.  when there are more buyer's then seller's than price goes up. When there are more seller's than price goes down.  Things like earning and stuff affect stock price in that if a company has higher earning then expected that means the company is doing well so more people want to buy.  In order to meet the demand of these increase buyer, the price must go up so that people sell.  This is what is happening on the stock exchange floor.  Basically wall street.  Usually for an individual they are buying stock from a broker.  its the broker that are buying and selling in huge quantities that move the market.  In the end its just comes down to supply and demand. everythin else is just affecting the supply and demand.