Saturday 18 October 2008

Why is the price falling?

Question: After buying some shares, the price keep on falling. The company is doing well - there is no bad news. "Why is the price falling?"


Basically, share price movement depends on demand and supply.

When demand exceeds supply, the price will rise.

When supply exceeds demand, the price will fall.

The price movement is thus determined by all the investors and speculators in the market. The instantaneous action of the aforesaid will propel the price of the shares in a particular direction - up or down.


Movement of share price = Demand vs Supply

Demand > Supply = Share price rises

Supply < Demand = Share price falls

Thus when share price falls, it means there are more sellers than buyers.


Ref: Making Mistakes in the Stock Market by Wong Yee

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