Why do stock prices fluctuate?

Pretty much everybody understands the basic of investing – buy low and sell high. Investors want to buy stocks and sell them for a profit after they move up.

But why do stock market prices fluctuate in the first place? Have you ever thought about it?
Stock prices move up and down every minute due to fluctuations in supply and demand. If more people want to buy a stock, its market price will increase. Conversely, if more people want to sell a stock, its price will fall.

Reasons for stock market price fluctuations:

News regarding the company (positive or negative): If there is any positive news regarding the company, then its demand increases which leads to an increase in the stock price. Similarly, if there is any negative news, demand decreases, and people start selling their stocks.

Earnings of the company:

Earnings refer to how profitable the company is. If the company is profitable and making good money it reflects in the stock prices and the prices go up. If the company is running into losses the stock prices starts falling.

Psychological factors:

‘Greed and Fear’ are the driving forces in stock markets which cause fluctuations in stock prices. When people are greedy, then the demand increases and when they are fearful, they want to sell their stocks which brings a decrease in demand. Further, all the people are not fearful and greedy at the same time. Other Factors: There are number of other factors that causes the fluctuations in stock prices. They included changes in government policies, political instability, overall economic and business conditions of the country, performance of International stock markets, participation of domestic and foreign institutional investors.

Summary:

Stock price fluctuations are nothing but a function of demand and supply. Every investor has a different opinion towards any stock. All investors have their own ideas and strategies. This difference in opinion is the main reason why stock prices fluctuate and there are constant changes in demand and supply.