Monday, August 4, 2014

Psychology in Stock Market

If I tell you what and why I bought the shares I have and, in return you also bought the same shares at your own accord and you tell your friends. Then your friends also did the same at their own accord and so on.

We and your friends are actually helping to raise that demands of that particular share (law of demand and supply), in return the market price of that share will likely increase. When the price do increase to certain point where its already profitable, likely someone who holds huge volume of shares will sell out, as a result that huge sell out will likely scare other traders/investors and they will do the same resulting to decrease in market price. When the market price of that share decrease and then with perhaps some good news or reports related to the stocks. Someone again will probably buy in huge volume attracting other traders/investor alike to buy, possibly pushing the market price higher again.

The cycle goes on and on. Perhaps this is one or the reason why the market price fluctuate. Those who can buy in huge volume will likely affect and possibly control the market price of that particular share. 

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