How do companies in the stock market give u a 20% profit and others 20% decrease in a single session?
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Example: Company A is trading in the stock market as usual, it started at $10 per share. And now (4 hours later) as the market is ready to close the price of per share is $12. Or Example: Company B is trading in the stock market as usual, it started at $12 per share. And now (4 hours later) as the market is ready to close the price of per share is $10. How is that possible how can a companies share price increase by that much or decrease by that much in a single session? When u invest in the stock market u are investing on a certain business, it isn't possible that the business u are investing in made a 20% profit or a 20% decrease in a single session? BTW: That doesn't happen to all companies but to probably 5% of the companies.
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Answer:
The amount of money a company is making is not what defines stock price. A stock I'm holding (actc.pk) has been losing money every year, yet they had a 800% gain last month. Because its a stem cell stock and when the FDA approved a stem cell company to start testing stem cell research on humans, all stem cell companies gained that day because people see that it may be the next big thing, so they start buying the stock, so the stock is now in demand and that increases the value. Obama is about to lift a federal funding ban on stem cell companies soon, so when he does lift that ban, the stem cell companies will jump that day as well and maybe continue to rise, even though most of them are not making any money at all and many are actually losing money. The stock market is all about news, emotions, and predictions. When news comes out that is good for a company or bad for a company, that affects the stock price. If Mcdonalds is making tons of money, that helps their stock price, but at the same time, if someone burns their mouth on coffee and sues mcdonalds, the day they win that lawsuit in court, the mcdonalds stock may take a hit and decrease a little. Not likely for a small lawsuit like that, but imagine a large lawsuit, that would really affect a stock price. People are predicting that stem cell companies will be the next thing, so they are buying the stem cell companies right now, which is helping their stock value, even though most of them are not making money. News, Emotions, and Predictions. It's not always about how well a company is actually doing. I day trade alot of stocks, so I buy stocks or sell stocks based on the news each day. Sometimes entire sectors are affected by one thing. For example, gas and oil would affect the entire energy sector. If the price of gas or oil suddenly drops, that will most likely affect all the energy stocks and make them decrease in value as well, especially the gas and oil stocks in particular, but all the energy stocks are usually affected. There is all kinds of factors that determine a stock price and why it fluctuates throughout the day. Sometimes just massive buying of a stock would cause the price to increase, massive selling almost always causes a stock price to decrease.
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