Changes at the Speed of Light
One of the many questions that are usually asked by traders is why did a certain stock either rise or fall. Sometimes it seems as if there is no rhyme or reason as to why stocks either rise very high or drop considerably over the course of a few months. Usually, the short answer to these questions is that the reason a stock climbed in price was due to fact that there were more buyers in the market than sellers, or that a company’s stock is now valued to be more due to growth in sales and profits compared to last years figures.
Sometimes it easy to determine the cause as to why a stock suddenly drops in price, maybe due to fraud, a drop in consumer spending habits or because a commodity such as oil makes a product much more expensive to produce and thus less attractive to consumers.
The important thing to consider when trading in the market is not if a stock will rise or drop, but what are your trading goals. Most investors trade either for the short term or long term. While all stocks usually move up or down during a year, short term traders usually look for stocks that make rather large movements either up or down and considered volatile. While most stocks that are volatile tend to be riskier, the payoff is far greater. For more conservative investors, many choose to trade stocks that show good growth over a long period of time. For instance, a day trader may look to make a profit in one day; a conservative trader may look to make a profit over a longer period of period, usually with less risk.
When trading look at your strategy and what you would like to accomplish, there are many ways to determine if stocks will rise or fall and there will always be instances where no one can tell why a certain stock dropped suddenly or raised in value very quickly. However, the one thing that you can always count on in the market is dramatic price changes.
