How to know the direction of a stock price

The stock market works on the supply and demand principle, whenever there will be more buyers there will be an increase in stock price and whenever there will be more sellers there will be a decrease in stock price.
So basically if you know that there will be more buyers or sellers then you will know that price of that stock is going to go up or down.

In order to know the number of buyers and sellers, you have to do two types of analysis:-

1) FUNDAMENTAL ANALYSIS
2) TECHNICAL ANALYSIS

1) fundamental analysis is a type of analysis in which you examine the growth prospects of that company in which you are going to invest whether the company is good or going to go do good in future then the price of that stock is definitely going to rise similarly if the company is bad then the price of that stock will go down.

In fundamental analysis, you can know the direction of the stock price for the long-term duration it is not like that if the company is good then tomorrow the stock price is going to go up, you have to wait for your price.

2) Technical analysis is a type of analysis in which you know the direction of the stock price by applying different indicators and getting signals.

Simplest method by which you can predict the direction is to know the support and resistance level.
The important thing you need to know is that technical analysis is temporary analysis, meaning it will not guarantee the direction of the stock price because the buyers and sellers are not robots they are humans their emotions of buying and selling is driven by physical things which are happening in the economy and at the end of the day the company’s future will determine the fate of the stock.
So the fundamental analysis is more important than technical analysis.

3)News

if you observe that when the news of any particular stock comes based on its positiveness and negativeness the price of the stock goes up or down.
Because of news, it influences the buyers and sellers in the market if the news is positive then there will be more buyers and if the news is negative then there will be more sellers so on the basis of the news, you can determine the direction of stock prices.
There are a lot of traders who take advantage of events, basically, they predict the news and buy or sell the stock.
For example, if the IT companies results are going to come today and I think that the results will be good so I would buy the stock and if the results are good there will be an increase in price which will give me profits.
Remember you need to be accurate in your predictions otherwise you have to bear losses.
These are the things which you have to keep in mind in order to know the direction of stock price.

Read: How to start investing in stock markets

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Saifullah Khan

Hi there, I am the owner of gloomyworld.com, read more about me here.

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