Share prices are chiefly driven by supply and demand. There are always a limited number of shares in circulation for any given company, so if lots of investors want to buy a share its price will increase. If demand drops, then a share’s price will fall.
However, there are lots of factors that can have an effect on demand. Here are three of the biggest.
Any news surrounding a company can cause movement in its share price. An earnings report that reveals significant profit or a new product launch could well lead to an upward movement, while a missed target or the departure of a key figure could lead to its share price decreasing.
In trading, sentiment refers to the overall feeling that traders have about an asset. It can often be purely psychological, as investors are influenced by the mood in the markets instead of concrete news or figures.
News that is outside a company’s control can also have a major impact on its share price. Changes in legislation, public opinion, economic health, or broader factors like conflict or natural disasters will all be seized upon by the markets.
To make sure that you don’t get caught out when negative news, market sentiment or current affairs impacts your portfolio, keep an eye on any upcoming developments that might affect your trades. Company earnings, industry or competitor news, social media and rolling news can all be key to ensuring that your positions don’t turn against you.