Why do stock prices fluctuate?


Stock prices fluctuate daily as a result of market changes. This means that stock prices change because of demand and supply.

Keep in mind that when there is a high demand the product is sold faster and the lower the supply and the higher the price. On the other hand, high supply lowers demand and therefore less demand means lower prices…

To put this in perspective, we can say that the stock market functions like an auction. When there are more buyers than there are sellers, the auctioneer would be able to re-adjusts the prices upwards because even though the product is now more expensive, buyers would still accept to pay that price for the product, because there are no other similar products with cheaper prices!

On the other hand, when there are more sellers than buyers, there is a rush to sell the products as otherwise, the sellers will end up with unsold goods. Buyers have more choice so they would be able to find cheaper products. So sellers would be willing to take the lowest bid to sell their products faster.

Have a look at this interactive video to help you understand more!