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What do share prices go up and down?

By September 12, 2021No Comments

Why do share prices go up and down?

Simply put, supply and demand. Buyers offer to buy shares at $X price, and the seller wants to sell their share for $X price.
A ‘trade’ will only occur when a buyer and a seller have the same price. Computers are constantly trying to match up buyers with sellers to execute trades on behalf of the buyers/sellers.

Stock Market Transaction

In this example, no-one wanted to buy their share for $10, so they compromised and sold it for $8. In reality, the trading doesn’t happen with in person, but rather through an online broker, and the auctioneer is a computer system.

When there are more buyers than sellers, the price goes up to reflect the demand, and when there are more sellers than buyers, the price can fall.

Note: The price of a share is not to be confused with the value of a share. The price is what people are willing to buy/sell it for, it could be $5, but the value could be $2, $4, $6 or even $10. Accurately valuing a company can be extremely complicated.

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