AboutJay Kay Expertise As a private investor for the past 40 years, I have experienced both bull and bear markets, and have lived to tell the tale. I should be able to provide you with serious, practical insights into managing stocks, bonds and mutual funds in your portfolio, along with useful information concerning most aspects of personal finance. No specific stock/bond recommendations furnished.
Question I am a completely amateur in stock market. It's not to long that i have started buying and selling stocks and generally seeking to make a profit out of it.
My question is if when the demand for a stock increases its price increases to? Does the opposite happens whens the supply icreases-meaning the price falls?
Do stocks also obey to the laws of demand & supply in other words?
Answer Your way of stating the possible circumstances is not an exact parallel. It would be better to say that while it is true that increased demand will bring about a higher price, it is not increased supply that will bring about a lower price, but rather less demand that will bring about a lower price (or perhaps just keep the price from rising even higher).
The price should continue to rise in the face of increased demand, even as the supply increases - until the price has reached what the market determines is a fair level (not possible to determine until it has actually happened). In other words, it is not the increased supply on the sell side that brings about the end of rising prices, but rather a market determination of the stock's current value, regardless of the supply. In a rising market, many stocks will rise above anything approaching reasonable value, carried along by the momentum of that rising market, and without (temporary) concern for increasing availability on the supply side.
