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Hows market goes up and down ?

  • hi friends. I have some knowledge about share market. but dont know how it goes up and down. what is the process when a company got profit and loss. how the company use money of the shares. and how the market changes its points in few minutes ?


  • What makes stock market prices rise and fall:
    http://www.best-stock-trading-systems.co...


  • Greed, fear and math. The math part is probably the most important. Most trades are done by computer software. Somebody wrote a formula to tell the software when to buy and sell. The human part is greed and fear. Somebody thinks a stock is going to go up so they buy. Somebody thinks the stock will go down so they sell.

    It use to be handled, and at some places it is still handled in the pits or "the floor." That's all those guys yelling, making signs and throwing paper around. Each pit is one company filled with buyers and sellers and they do quick auctions for the best price. More and more, it's all done through the computer.

    Companies get money buy literally selling itself in the form of shares through an IPO auction. Then the shares that the people bought at the IPO are sold to the common people (although not all the shares). Everyone gets voting rights for the board and the board elects the CEO of the company. If the board does poorly, they get voted out. Companies or others can buy a majority stake giving themselves enough votes to control the board. This is how companies get bought out.

    A special case with banks, is they can only lend out money at the amount the bank is worth. That worth is done by total stock worth. If bank stocks drop, they can make less or no loans if the case is they have more loans out than their stock is worth.


  • As explained earlier, the company gets money only the first time it issues shares in the public market via an IPO (it can do this later via seasoned offering). The company then uses this capital along with Debt capital (borrowed money) to run its businesses. The company is supposed to pay interest and principal on its debt. After this payment, any profit left belongs to the shareholders. A company would typically reinvest some of the left over profit to expand the business and mature companies return some of the profit to shareholders in the form of dividends.

    Once the shares are issued, it trades among investors. It just changes hands from one investor to another. This money does not go to the company. Whoever owns the shares gets the dividends.

    Share prices represent the value of the company. Value of the company depends on its future profits, growth rate etc. Companies are required to report their financial statements periodically. Investors use this and other information to determine its value. If they think the current share price is cheap, then they will buy shares of the company. Others who think it is over valued might sell the shares. Still others sell the shares because they have to convert their investment into cash. Thus, the share price of a company goes up and down depending on the number of buyers, sellers and other information about the company and the overall economy keep coming in.







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