The stock market is a marketplace and it’s all about supply and demand. If more people want to buy a share than sell it, the price will go up. If more people want to sell than buy it, the price will fall. This basic logic is easy to understand. However, understanding why prices move in a particular direction is more difficult.
For example, one reason shares may jump is when companies report their financial results. These often give investors an insight into how well the company is doing and their outlook for the future. Positive announcements will make the shares more attractive to investors and negative ones will turn them off.
Other factors that can cause stocks to jump include economic data such as the latest unemployment figures or consumer confidence. Or political events such as Donald Trump’s trip to Asia this week, where hopes are high that he might finally strike a deal with China’s President Xi Jinping. This would ease trade tensions and could calm markets. The key is to try and stay clear of the noise and focus on companies that are trading at reasonable valuations. This will give you more downside protection if markets do retreat.
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