Beginner questions - what influences the rise and fall of...

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Old Apr 13, 2012, 9:26pm   #1
 
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Joined Oct 2011
Beginner questions - what influences the rise and fall of...

Hi

I'm a beginner here but I was watching the Burberry stock today after the bad news from China came out, the stock fell about 17 pence in the first hour of the day. Then at midday it had risen back to the previous days close, before falling 20 pence by the end of the day.

I understand why it fell in the first place (because Burberry get their clothes manufactured in China but I don't know any more than that... so if someone could elaborate that would be great). But i'm confused why it rose at midday before falling. Is this simply because investors thought it was undervalued or did they think the news shouldn't affect it as badly as first presumed? Also why would it have dropped again by a similar amount after rising?

I am a beginner and I really want to find out more as to why stocks rise and fall so if anyone can explain what has happened to Burberry today that would be great and I'd really appreciate it.

Would anyone recommended any reading for me to understand why stocks rise and fall? At the moment I just follow them rising and falling based on positive and negative news but obviously there's a lot more to it than that.

Many thanks

Charlie

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Old Apr 13, 2012, 10:11pm   #2
 
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Re: Beginner questions - what influences the rise and fall of...

Supply and demand, buying and selling. Don't look into anything more meaningful than that or you'll be chasing ghosts.

Sometimes it sells because of fear, or rises because everyone thinks it's going up. Maybe a big player decided to get in on the action and pushed price the other way. Very little of it has anything to do with news.
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Old Apr 13, 2012, 10:20pm   #3
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Re: Beginner questions - what influences the rise and fall of...

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Originally Posted by charlie7 View Post
Hi

Would anyone recommended any reading for me to understand why stocks rise and fall?
Many thanks

Charlie

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I recon if there was an answer to your question, its existence would instantly render it useless.
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Old Apr 13, 2012, 10:30pm   #4
 
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Re: Beginner questions - what influences the rise and fall of...

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Originally Posted by VielGeld View Post
buying and selling. Don't look into anything more meaningful than that or you'll be chasing ghosts.
a common misconception. buying and selling doesn't cause price to move. for every seller there must be a buyer, therefore there is always the same volume of contracts sold as bought in the market.

what matters is who, why and how they are doing it.

put the kettle on and think about this. tah tah.
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Old Apr 13, 2012, 10:40pm   #5
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Re: Beginner questions - what influences the rise and fall of...

Imagine you don't own any stock, it is in someone's financial interest to cause a stock you are watching to rise in price. So that you think the stock price is going to go through the roof. So you buy from them when the price is high.

Now that you own a stock, it is in someone's financial interest to cause the price to collapse. So that you panic sell to them at a low price to preserve what little value is left of it.

In effect the price rises and falls depending on your disposition. In this context you/your refers to the aggregate of "investor" joe's out there hoping to make a quick killing with no risk and no work.

Is making money that easy ? Yes, if the joe's are your customers.
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Old Apr 13, 2012, 11:43pm   #6
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Re: Beginner questions - what influences the rise and fall of...

The bid and ask and all the thinking behind the bid and the ask.
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Old Apr 14, 2012, 12:47am   #7
 
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Re: Beginner questions - what influences the rise and fall of...

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Originally Posted by ChocolateDigestive View Post
a common misconception. buying and selling doesn't cause price to move. for every seller there must be a buyer, therefore there is always the same volume of contracts sold as bought in the market.

what matters is who, why and how they are doing it.

put the kettle on and think about this. tah tah.
Not really a misconception, rather a different way of viewing things.

If there are a vast majority (in money terms rather than in terms of people) urgent to buy, and very few willing to sell (less urgent), then the price will rise. Put another way, there was more buying pressure, than selling.

You state that buying doesn't cause price to move. So if you see a list of bids and asks, several levels deep, and someone buys up all the asks on that depth and wants to buy more, are you saying the price doesn't move? Did the buying not cause price to move then?

'For every buyer there must be a seller'. Well for every traded contract there must be a buyer and a seller. But that's not that same statement, at least to me.

Last edited by Shakone; Apr 14, 2012 at 12:54am.
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