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Why do prices change?

What you will learn

Open a chart and find a period of rising prices and a period of falling prices.

A market price is formed at the meeting point between buyers and sellers.

Business results, expectations, interest rates and events can change demand and supply. Good news does not guarantee a rise: sometimes investors expected more. A chart shows what happened, not what must happen next.

A company earned more, but less than the market expected. Its price can still fall.

Open a chart and find a period of rising prices and a period of falling prices.

Investor.gov · Stocks ↗

A worked example and a common misunderstanding

A seller asks 102 while a buyer offers 100. Showing both prices does not mean a transaction has occurred. The last traded price also does not guarantee the next execution price. In practice, distinguish the displayed quote, the price when an order is confirmed and the total transaction amount. A price movement describes what happened in the market; by itself, it does not establish the cause.

Concepts that help you compare

Stock: a small piece of a company

A stock is a share of ownership in a company. A stock’s price changes in the market and is not a promise of future value. A company may distribute part of its profits as a dividend, but it is not required to do so. You can gain from a price increase or lose from a price drop; in an extreme case you can lose your entire investment.

Comparison example: If you bought two shares at 50 ₪ each, the cost is 100 ₪ before fees.

Read the full guide

Risk: understanding what you can lose

Risk is the possibility that the outcome will be different from expected, including loss. Investments with higher potential returns often carry higher risk. Money held without change in the number of shekels is also exposed to erosion of purchasing power. It is important to understand when you will need the money and how much uncertainty you can bear.

Comparison example: Money for a trip in a week serves a different purpose than money for a distant goal.

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Check your understanding

A company reported a profit. Must its stock go up?

  • Yes
  • No
  • Only if I bought it
Answer and explanation

No. Price is also affected by expectations and other factors.

What does a historical chart show?

  • What already happened
  • What will happen for sure
  • Which stock is right for everyone
Answer and explanation

What already happened. A chart describes past observations, not a guaranteed forecast.

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