Whether you’re an active investor, a day trader, or a broker, your sensitivity to the performance of stocks must be above average. You have to constantly follow stock market news to know where to pump in your money and, of course, the stocks to pull out of.
Your alertness to market dynamics must transcend the magical digits you watch on the stock exchange big screens. Because a stock’s price and stability are influenced by different events, you must always be on the loop about activities surrounding your stocks of interest. The company management, industry policies, and government activities, all shape stock prices in one way or the other.
This is the reason why analysts and brokers always study the trading environment to come up with future stock price estimates.
Even though analysts carry out extensive research on every stock before releasing their predictions, accurate estimates are hard to come by. This is not to say that analysts are always wrong, otherwise they’d all be out of business now. However, a single event can see the price of a highly lucrative stock slump in just a matter of seconds.
A shrewd investor, therefore, digs beyond a stock’s current price but also scrutinizes past performance, responses to external events, management stability, market trends, and any impending activities by the company.
Factors Affecting the Performance of a Stock
- Economic Health – Surges in the economy will greatly affect stock prices. If an economy experiences a downturn, the share prices will also go down and vice versa. Therefore, signs in the economy can give a hint on the direction a company’s stock price is likely to take.
- The Condition of a Stock’s Market – When the market is “bear,” most investors will avoid stocks. This will drastically lower its price hence poor performance. The converse, “bull,” is also true. When a stock is “bullish,” meaning investors believe its price is going up, the stock’s performance shoots up, leading to higher prices.
- Company Performance – Stable and growing performance by a company is likely to influence its stock price upwards. Other performance metrics such as higher revenue, quarterly earnings, and dividend payouts also work to influence a stock’s performance.
To invest in stocks, understand the market dynamics, where to get reliable analyst reports, and always be on the lookout for financial news. At the end of the day, those who’re actively involved in trading put in work for more rewarding trading.