What factors are responsible for frequent changes in price of stocks?

It is a well known fact that stock market is of highly volatile nature. On daily basis we see some changes in prices of different stocks. If demand of a particular stock is high then its price will go up and vice versa. To cope up with markets volatility in a wise manner traders choose to follow experts recommendations on trading tips, mcx tips and more. Theoretically when traders buys a stock they are stating that it is undervalued and they expect its price to rise in future and the one who is selling has opposite belief.

Stock price = (Present value of all future earnings)/ number of outstanding shares.

It tells about a company's earning capacity. A company which is not performing well at present can have high stock price based on its future earnings because as long as a company has potential to earn good in future investors and traders are ready to buy its stocks.

Some people does not believes that it is possible to predict the movement of stocks price in the right direction whereas some does. Some factors which are responsible stocks price fluctuations are discussed below :

1. Uncertainty

What a company is going to earn in future is quite uncertain and this uncertainty leads to nervousness in market. Though there is no relevant information available then to stocks bounce a little as future is not certain.

2. New information

Even a small piece of information can lead to high volatility in stocks price. Market always price a stock on the basis of all information which public is aware of. Every individual perceives new information in a different manner. Price movements follows the direction which is followed by majority traders.

3. Fear and greed

There are various psychological factors which decides how stock price will vary. When traders fear they look to exit their position from market as soon as possible and when majority does the same price of stock starts falling. Greed causes prices to rise as more people starts buying it. However changes caused by it is for short period of time.

There are several theories which tries to explain how stocks price moves however there is no theory which explains it correctly. At fundamental level it can be said that demand and supply decides the price of stock. Traders who are new to trading can rely on usage of financial advisory services to ensure their good earnings form market.There are ample opportunities offered by market using which profitable returns can be earned. To use those opportunities and make them work in your favor good knowledge and experience is required. It is advised to first gain sufficient knowledge and do paper trading to trade well in market.