>> Stock Prices

Stock Prices

Understanding what makes stock prices move in both directions is crucial to your overall understanding of the stock market and your success in trading.

You may also have heard these price fluctuations, or market trends referred to as bull market and a bear market. This page will explain the factors that effect stock prices, market trends and what all of this means. There are many factors that contribute to the movement of stock prices.

Factors such as interest rates and inflation contribute to changes in the market. Movements in other markets like bonds, currencies and commodities also have an effect on stock prices. Any major political or social volitity can have an impact as well on overall stock prices.

Like anything financial, stocks operate within the laws of supply and demand. Investors keep a close eye on things such as interest rates because these factors have an effect on the amount of funds in circulation and the amount of funds available to companies and consumers.

It is only logical that when interest rates rise and less disposable income is available to businesses and consumers that many companies suffer a loss in revenue as a result. In the case of rising interest rates, this widespread decline in revenue has an overall effect on stock prices and investor confidence.

The price of stocks are reflected as a whole in what is known as market trends. There are two types of market trends, one known as a Bull Market the other a Bear Market.

A Bull Market
A bull market is one in which there is a greater degree of investor confidence. A bull market will see investors buying stocks expecting to make a gain. Historically, the 1990's was a long running and memorable bull market.

A Bear Market
If stock prices are falling over a period of time, and investor confidence is diminished, it is known as a bear market. In a bear market, investors are looking to cut their losses and sell their holdings. It is a rule of thumb that a 20% or greater decrease in a key index over a period of two months or more constitutes a bear market.

On a smaller level, there are constant changes in the prices of individual stocks. Over the course of a trading day as stocks are bought and sold, the market price adjusts it's self constantly to reflect this trading activity. To check current stock prices in near real time, you need to look no farther than your online trading account or a third part website such as finance.yahoo.com.

Experienced traders and professional stock brokers are at an advantage in interpreting what factors will effect the movements of individual stocks and the market as a whole. These traders follow the latest information released in the finance world and use the information in predicting movements in the market.

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