6 Forces That Move Stock Prices Up And Down

A stock trading chart

Stock trading is tricky as it involves the constant buying and selling of shares before their prices drop. You can trade shares with different buyers and sellers after deciding on a trading price. However, you need to be focused if you want to become a successful stock trader and actually make some profit. The main point is to keep your losses to a minimum and understand the stock market’s pattern. That’s why we’ve created this guide to help you understand the factors that impact the stock prices so you can get better at trading.

Economic Factors

The economy has the biggest impact on stock prices. If the economy is growing faster or slower than expected, then it can drive stock prices up or down. Recessions and economic slowdown also make the prices go down. On the other hand, a growing economy with high inflation rates can drive the prices up due to higher interest rates.

Political News

Military conflicts, legislative uncertainty, and elections can also have short-term impacts on stock prices. For example, in 2020, stocks were a bit unpredictable due to the US election because the administration hadn’t been decided. More recently, the Russian invasion of Ukraine has also driven certain stocks down to the correction territory.

Technical Factors

New traders and short-term traders commonly rely on technical analysis to make decisions regarding their stocks. Technical analysis uses chart patterns and price movements to predict the stock’s direction. That’s why these analyses can drive stock prices up and down for a short period of time. Ultimately, it’s the business’s earning powders that determine the long-term stock price.


Black and white chart on the screen

Earnings Growth

A company’s growth and earning potential play a major role in setting the long-term prices of stocks. This growth can be driven by economic factors or internal matters of a business. For example, some businesses grew a lot during the pandemic due to increased online sales, which increased their stock prices. On the other hand, some businesses recorded lower sales, decreasing their stock prices.


Dividends are basically ways a company can share its profits with the investors. Bigger companies usually share more of their earnings with their shareholders in the form of dividends. This is because these companies can’t offer cash at attractive rates of return. The more share repurchases happen, the higher the stock prices go.

Change In Valuation

This is the hardest variable to predict because it requires predicting the growth rates and rate of interest in the future. Generally, companies with high growth rates have higher-priced shares. But interest rates, investment risks, and returns can affect these prices and cause them to go down.

If you’re interested in trading stocks but can’t figure out how to do so, check out Trading Mentor. We are an online mentoring platform that allows retail traders to find mentors based on their experience, nationality, and rating. All you need to do is give us your requirements, and we will book a free consultation call for you with your private one-on-one coach. Additionally, we also offer stock trading courses to beginners.

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