While historical data can be great for making longer-term market predictions, day traders generally require access to real-time information. Stock charts are helpful for gauging supply and demand, but they only show historical data. We know how supply and demand levels affect a stock’s price, but how do we measure these levels?įirst things first, we can analyze a stock chart.Ī downtrend suggests that supply levels exceed demand levels, whereas an uptrend suggests that demand levels exceed supply levels. Of course, supply and demand levels are always fluctuating therefore stock prices are as well.

If everyone wants to buy AAPL stock at $140, the price will continue to increase until an equilibrium price (supply=demand) is reached. The same logic holds true in the stock market. Contrarily, if 2000 people were willing to pay $400, Apple may be able to increase the price. If Apple creates 1000 iPhones ( supply) to sell for $400 each but only 500 people ( demand) want to buy iPhones for $400, what is Apple going to do? If you guessed that Apple would have to lower the price of their iPhones, you’d be correct. In fact, our lives are affected by supply and demand principles on a daily basis. The influence of supply and demand is ubiquitous. When a stock’s demand (buyers) is great than its supply (sellers), the stock price will go up.When a stock’s supply (sellers) is greater than its demand (buyers), the stock price will go down.“Supply” represents sellers and “demand” represents buyers. There are plenty of different factors that can affect a stock’s share price, however all of these factors operate around the same basic economic principle: supply and demand. What Causes a Stock Price to Go Up or Down? In order to make these predictions, you’ll need to understand what causes price movement.

After all, the main job of a day trader is to formulate hypotheses about whether a stock will increase or decrease in price. While there are a few basic prerequisites to day trading, the first thing you’ll need to know is what causes a stock price to move up and down. Knowing how the market operates can help demystify the elusive world of day trading and allow you to create strategic trading plans. As a day trader, it’s important to understand basic market principles before attempting to develop a profitable trading strategy.

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