Changes

During the internet “dot-com” boom of the late 1990s, stock prices surprisingly increased for companies that were losing money.  That was because people expected the companies to be very profitable in the future.  Sometimes it even seemed like the more a dot-com company lost money, the higher its stock would go!  That was very unusual, but was based on expectations about the future.  As it turned out, most of these companies went bankrupt, and the internet became profitable for only a few companies like Google.

During the internet “dot-com” boom of the late 1990s, stock prices surprisingly increased for companies that were losing money.  That was because people expected the companies to be very profitable in the future.  Sometimes it even seemed like the more a dot-com company lost money, the higher its stock would go!  That was very unusual, but was based on expectations about the future.  As it turned out, most of these companies went bankrupt, and the internet became profitable for only a few companies like Google.

Stock prices on the New York Stock Exchange and NASDAQ (the stock exchange for new and often high-tech companies) are determined entirely by “bid” and “ask” prices of the buyers and sellers.  Someone will “bid” a certain amount to buy a stock, and a seller will “ask” for a certain price.  When the bid and ask amounts equal, then a sales transaction occurs.  Prices can move very quickly and unpredictably when millions of people are involved.

Stock prices on the New York Stock Exchange and NASDAQ (the stock exchange for new and often high-tech companies) are determined entirely by “bid” and “ask” prices of the buyers and sellers.  Someone will “bid” a certain amount to buy a stock, and a seller will “ask” for a certain price.  When the bid and ask amounts equal, then a sales transaction occurs.  Prices can move very quickly and unpredictably when millions of people are involved.  When the overall trend of stocks from day-to-day increases in price, then it is known as a "bull market"; when the overall trend of stocks from day-to-day decreases in price, then it is known as a "bear market."  You can remember that by thinking that bears are scary, and stock markets that crash in price are scary things.

As explained above, the price that a stock trades on the exchange is where the “supply” by sellers equals the “demand” by buyers.  When a seller of stock asks too high a price, then there are no buyers and the stock does not trade.  When a buyer of stock offers too little a price, then there are no sellers and the stock does not trade.  The transaction only occurs when SUPPLY EQUALS DEMAND.

As explained above, the price that a stock trades on the exchange is where the “supply” by sellers equals the “demand” by buyers.  When a seller of stock asks too high a price, then there are no buyers and the stock does not trade.  When a buyer of stock offers too little a price, then there are no sellers and the stock does not trade.  The transaction only occurs when SUPPLY EQUALS DEMAND.