Investing

Why Stock Prices Go Up and Down, Explained With Tilray

why-stock-prices-go-up-and-down-explained-with-tilray



Pretty much everybody understands the basic premise of investing — Buy low and sell high. Investors want to buy stocks and sell them for a profit after they move up in price. But why do stock prices move up and down in the first place? If you’ve ever asked that question, this video is for you.

In short, stock prices change because of supply and demand. Think of the stock market as a giant auction, with investors making bids for one another’s stocks and offering to sell their own all at the same time. For example, Apple’s shares trade hands over 28 million times a day on average, which translates to nearly 1,200 accepted bids every second of every trading day!

Because there is a limited supply of shares available for sale, bidders must compete with one another for access to shares. The more intense the interest in a stock, the more bidders there are attracted to it, and the less interested current shareholders are in selling their own stock. As a result, potential buyers must bid higher to buy the stock, and the stock price moves up.

This works the other way as well. When interest in a stock declines, fewer competing bids are entered, holders are more interested in selling their stock, and the lower the winning bid price must be.

But what determines investors’ interest in a stock? In short, information. Information comes in many forms: earnings reports, press releases, news stories, court filings, Tweets, general hype, you name it. Investors, whether consciously or not, incorporate each new piece of information they come across into their impression of a stock.

Of course, every investor reacts to new information differently, and those reactions can range widely from apathy to panic to euphoria. Depending on their reaction, investors may choose to buy more shares, hold the shares they have, or even sell.

In turn, these reactions are incorporated into the share price, causing fluctuations in price. Interestingly, the change in share price itself is information that is incorporated by subsequent bidders, and the cycle of information-reaction-price move-information repeats once again.

When supply of a stock is limited and interest is high, a stock’s price can skyrocket. For a recent example of this, let’s take a quick look at Tilray, the first marijuana company to go public directly on the Nasdaq back in Summer of 2018. After going public at $17, the Tilray’s stock soared, eventually reaching a peak of $300 a share.

Much of this rise was driven by a limited supply of publicly available shares, as most of the company’s stock was still privately held by Peter Thiel’s Privateer holdings, as well as a limited availability of other publicly traded cannabis producers for investors to purchase.

Combining the market’s rabid interest in investing in pot with an artificially limited supply of shares led to Tilray’s rapid ascent. However, as other pot companies began publicly trading, demand waned, and when the lockup for private equity investors expired in January 2019, the number of shares on the public market surged, pushing down the stock. Today, Tilray trades 78% below its highs. The law of supply and demand remains undefeated.

If you can imagine this cycle of supply and demand being repeated over and over again among millions of investors and stocks across the world each and every trading day, you’ll have a working idea of the mechanisms that influence daily fluctuations in stock price. As you can probably guess, investors’ reactions to new information aren’t always rational. As long term investors, we look for opportunities to capitalize on the market’s short term irrationality to create long term wealth.

Thanks for watching guys, if you enjoyed this video please smash the like button down below. We’ve got plenty more like this one on our channel, with more videos being added every week.

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50 Comments
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Robert Dunfee

50 Comments

  1. Judy L.
    July 16, 2021 at 1:44 am

    Okay, but can someone please explain to me why people have an interest in any stock in the first place? What are they getting out of it? I can sort of understand having interest in a company that pays dividends but why have interest in a company that is doing well if there is nothing in it for the stock investor other than hoping other people will have interest and that will make the price per share go up? Do you understand what I am saying? What is people’s interest based upon? What are they hoping to get? I understand there is a limited number of shares for sale and the price is determined by the level of people’s interest in owning shares; i.e., supply and demand; but what does a person get out of owing shares? Let me put it another way. Imagine there is a great widget that everyone wants because it can make you invisible but there are only 50 of these in the world. I can see why a person would want this and pay a lot of money for it. It has a real benefit to you – you can be invisible. That would be very useful in many ways. It’s fun, you could spy on people, etc. Therefore you’d be willing to pay a lot of money for it because it will be providing something to you that you desire. But what does having an interest in a stock provide to you that’s desirable? I could understand having an interest in owning stock in a company if, for example, every time the company made X dollars it was obligated to pay out X dollars per share to the share holder. But that is not the case in stocks that do not pay dividends. So why do people have any interest in them? I hope I am explaining my question well enough for someone to help me answer it. Thank you.

  2. shad95
    July 16, 2021 at 1:44 am

    Cheers mate!

  3. derper derp
    July 16, 2021 at 1:44 am

    Who determines the bid

  4. OG Reggie B
    July 16, 2021 at 1:44 am

    SPACE AGE TRADER'S ALERT 📢 WEBULL, YOUTUBE FOLLOWERS AND FELLOW AMERICANS.

    Some of you are wishing me good luck out here and I appreciate you for that.
    However, I don't rely on luck my game is all about the numbers.

    My money 💰 is long and my game is strong. This is not my first rodeo with these Wallstreet Cowgirls.

    I got this and you best believe, when I'm down the whole Stockmarket is down. Until things change buy low and look to sell high. That's playing the numbers right.

    Wallstreet is on sale, I'm buying more but stocks only now because options are time depreciating assets.

    Peace ✌ OG-RB
    THE ROBINHOOD OF TRADERS

  5. OG Reggie B
    July 16, 2021 at 1:44 am

    SPACE AGE TRADER'S ALERT 📢 WEBULL, YOUTUBE FOLLOWERS AND FELLOW AMERICANS.

    AAPL, TSLA & COIN
    I warned all of you that, the racism for me runs deep and crashing the Stockmarket is their only option with me.

    I'M A BAD BOY 4LIFE!

    ARE YOU FEELING ME YET? LMAO 🤣

    OG Reggie B
    Keeping it Real 💯

  6. OG Reggie B
    July 16, 2021 at 1:44 am

    SPACE AGE TRADER'S ALERT 📢 WEBULL, YOUTUBE FOLLOWERS AND FELLOW AMERICANS.

    AAPL, TSLA & COIN
    What I tell you guys. Ttade these with caution while I'm in control of them.

    Who else you know, calling it like I do about the stocks they're trading.

    I got these Brokers Boys breaking all their own established rules of play, trying to beat me.
    Do you really think they would be bringing down the whole Stockmarket, if they were beating me. My largest positions are in stocks, therefore at the end day, all I have to do is be patient and I win sooner or later in time,, every time.

    It should be obvious that I'm keeping it real with you guys by now and got these Brokers in a real choke hold.

    No one is hating on me anymore because it is, what I say it is. Heck wouldn't know of you were in a fight or not too?

    Hey but no need to worry about an OG because I got them right where I want them. Pulling out all their stoppers and fighting to keep the NASDAQ afloat. How are they doing with that? LMAO 🤣

    Peace ✌ OG Reggie B.
    THE ROBINHOOD OF TRADERS

  7. The Mummy Cats
    July 16, 2021 at 1:44 am

    Roll Tide!!!

  8. Allinone Al
    July 16, 2021 at 1:44 am

    very poor explanation. Watch this for the answer: https://youtu.be/6i4xPdCQ-L8?list=PLwOGERTYNDVeGKGS6iMMAbSkSraSK1pB1

  9. BovineJonie
    July 16, 2021 at 1:44 am

    This has been wildly informative. Thank you.

  10. Boudoir à la Mode
    July 16, 2021 at 1:44 am

    Thanks this was helpful.

  11. J D
    July 16, 2021 at 1:44 am

    I put in 20$ in GameStop now I’m up too 73$ so I sell or hold it not a lot don’t know what to do please help

  12. Dunch Master
    July 16, 2021 at 1:44 am

    Anyone else just want to find the math of how the stock market "knows" how much to increase/decrease the value automatically? I know its probably a bunch of math but I wanna know so I can see that it makes sense and that its not being changed manually or something.

  13. S K
    July 16, 2021 at 1:44 am

    Share prices in a crash are self fulfilling prophecy. Unless someone drops a nuke on Wall Street I never sell and never will dividends till I die please and thank you.

  14. Enstein Sugumar
    July 16, 2021 at 1:44 am

    Not all orders are limit orders – bid and ask. What happens when buy and sell happen with market orders? How the current price is calculated?

  15. Johanna Denny
    July 16, 2021 at 1:44 am

    I enjoyed this video. I good stock it invest in is SAIA. It's a trucking company and they do great business! Everywhere you drive to in the US, you see their trucks. Check it out.

  16. Avi Mehenwal
    July 16, 2021 at 1:44 am

    But then who updates the NEW prices? How does it happen?
    Let me explain my question, I have 100 stocks which I bought for 999$, then I sold them 100 stocks for 500$.
    How would above transaction affect the stock price? Who will update the new prices?

  17. justice akewright
    July 16, 2021 at 1:44 am

    This aged well 😂

  18. The happy moment
    July 16, 2021 at 1:44 am

    Is it about the company goes up and down with their profits too or not ?

  19. MagnumDB
    July 16, 2021 at 1:44 am

    Gahh! Nothing is answering my question on the big picture of it all! The only reason person A wants to buy a share is to sell it for more to person B who wants to sell it for more to person C… but why does anyone want the share in the first place? What does it matter if a company is doing well or not? The share you own isn't a portal for the companies profits to spill out for you. You don't become more of an owner in the company based on how expensive the share is. Person A only makes money because person B just happens to want it more. We are all fighting over something that only has value because we just happen to say so. It's just so weird. I don't get why we've all agreed to buy these stocks from each other when they have no inherent worth.

    We've just arbitrarily decided we want to buy it to sell it for more because for some arbitrarily reason someone else wants to buy it for more because they'll sell it to someone else who arbitrarily wants to buy it for more is the same reason.. over and over again.

    We can also prophecy

  20. Magito Baetanto
    July 16, 2021 at 1:44 am

    I like your clear and concise explanation.

  21. LEOS BIZARRE YOUTUBE CHANNEL
    July 16, 2021 at 1:44 am

    buy AMC

  22. jim ross
    July 16, 2021 at 1:44 am

    Like the 'cashing in on others irrationality'

  23. mrzautobot
    July 16, 2021 at 1:44 am

    I love the music.

  24. Tiffany Scott
    July 16, 2021 at 1:44 am

    So basikully i buy and go to moon 🚀🚀🚀🚀🚀🚀🚀🌕. Sorry for my bad spelling, im an inbred

  25. Bambino
    July 16, 2021 at 1:44 am

    Love, it!. Short and easy to understand. You talked about demand and supply , hwere can can a begginer find how many stocks are issuea dna how many are available for trade?

  26. keithspence
    July 16, 2021 at 1:44 am

    Nice Fluid Video, but you missed out the important bit, the bit about the Computer Algorithms that have been set up by by the Stock Markets by a Hoard of Expensive Software Engineers and Architects to create "randomisation", it's the bit of software designed to never truly reveal if Red 13 will show up next, without this Software Algorithm a Stock would be just left to market manipulation; As simply rushing out at first opening to buy say a 10,000 "Separate Bids" of A Particular Stock would see an immediate and massive spike upwards, which could then easily be continued by supplying the market with even more multiple bidding throughout the day, then simply closing out your position at the end of day, profits all around,
    However the Software is aware of all of this and much more and is designed to throw the price into different directions, the only time that the Computers Algorithms seems to stall is when as you put it in your Video, market demand is just so great as to be just to much to bear and a constantly overbought stock simply has to go Up in Price, until selling pushes the price down.
    So, by and large it is Computer Algorithms that make Stocks rise and Fall.
    Mr Spence Eng [Day Trader, with over 40yrs under my belt]

  27. FaReal WitIt
    July 16, 2021 at 1:44 am

    Thx

  28. TheDWZemke
    July 16, 2021 at 1:44 am

    Nice job! It would be nice to see the breakdown of percentages of when good new hit how long does it last? For example I have put options on kodak at $5.00 but today we had a positive news for the legal ruling. I should make a 10 x… on my puts and will sell 50% today and 50% tomorrow… what buckets, bins, groups, do you put data in…??? For example a Pareto chart.. ie 80% of news drive price 1 day 15% drive price for 2-3 days and 5% change the price for an extended period of time …2 weeks or more?

  29. Dheeraj Kumar
    July 16, 2021 at 1:44 am

    Suppose a stock price is 100. And a buyer want to buy it at 102. But none of the seller want to sell it at this price. And this remains for a entire trading session. In this case what will be the current share price?
    a) will it be 100
    b) will it be 102
    c) will it go to the upper circuit of the share . Suppose it has 10% upper circuit. So in this scenario, will the share price be 110

    Please suggest.

  30. Julien Allinder
    July 16, 2021 at 1:44 am

    Roll tide

  31. Calvin
    July 16, 2021 at 1:44 am

    What if one buys or sell a stock in a span of a month or a years will the price of the stock remains the same ?

  32. Ron Zeta
    July 16, 2021 at 1:44 am

    Thank you! Very clear explanation!

  33. Jerry Wilson
    July 16, 2021 at 1:44 am

    Damn, McLovin, thanks!

  34. KRISHNA CHIDDARWAR
    July 16, 2021 at 1:44 am

    How to evaluate STOCKS | Basics

    Buying an overvalued STOCK will decrease your Net Worth. Buying undervalued stocks and holding them for the long run, though, can help you to quickly increase your net worth.

    Watch this video to learn more!!
    https://youtu.be/tAspifjj1zs

  35. Chamkor Singh
    July 16, 2021 at 1:44 am

    The A in FAQ's stands for Alabama.

  36. Derum Philo
    July 16, 2021 at 1:44 am

    Excellent Video, This setup is indeed very understandable, As a beginner, I’ve come to realize that experience beats hard work, I made weak profit investing on my own, but for the past 2 months with Mr Isaac Syzmon, i have made huge profits. His strategies are outstanding

  37. StonkSlayd
    July 16, 2021 at 1:44 am

    ok but you didnt explain what affects supply and demand. doesnt explain what affects stock price.

  38. StonkSlayd
    July 16, 2021 at 1:44 am

    i can look at the display off your glasses

  39. HEDGEHOG TV
    July 16, 2021 at 1:44 am

    Please feel free to use my promo code.. we both get 1 free share each.. upto £100 – http://www.trading212.com/invite/FfauSfJL

  40. Goldie
    July 16, 2021 at 1:44 am

    This does not answer my specific question. This information seems obvious to me.
    I want to know the formula that produces the final price that reaches a ticker. Their must be a formula. What is that formula. Who produced/created/controls the formula?

  41. Mary S.
    July 16, 2021 at 1:44 am

    Capitalize on the markets short term irrationality to create long term wealth. Thank you for that. I just got into this during the Covid era. I only bought about 2500 dollars worth of different stock to see how this worked. So far, everything I bought has been doing better than what I bought it for. Mostly in gaming and travel. But we will see what happens in a year. Thank you for your videos.

  42. Bryan Sheehy
    July 16, 2021 at 1:44 am

    Don’t forget about the Illuminati! That’s a reason too ya know.

  43. David Tang
    July 16, 2021 at 1:44 am

    Great video! Do you think you will be able to talk about "VOL 20" volume traded to whether this indicator help to traders' confidence? Thanks.

  44. Amir United
    July 16, 2021 at 1:44 am

    Where does all of this asking and bidding actually take place? Is there some secret club of traders that meet? I'm an investor and bidding and asking ain't offered at any brokerage I've ever seen. All I see is market buy limit buy limit sell stop loss and then a bunch of options. Is that what you mean when you say bidding fool? Or is it the secret club of traders that places the bids. Please clarify.

  45. jerry hello
    July 16, 2021 at 1:44 am

    I always wondered what career path Michael Bolton from Office Space ended up in. He's apparently at Motley Fool!

  46. Michael Davies
    July 16, 2021 at 1:44 am

    UCF 2017 National Champions babyyyy!

  47. Dan
    July 16, 2021 at 1:44 am

    Roll tide

  48. Autumn Winds
    July 16, 2021 at 1:44 am

    Thank you for posting this well-explained information.

  49. Frank
    July 16, 2021 at 1:44 am

    It's because of Motley Fool – when they recommend that readers/subscribers buy a stock it's because they and/or their sponsors are getting ready to sell the shit out of it – so first it goes up to attract all the idiots and then it goes down when MF and friends dump it. Is that called pump and dump….? I don't know.

  50. freakk21
    July 16, 2021 at 1:44 am

    WELCOME TO THE WORLD OF SUPPLY AND DEMAND – GOOD LUCK JUDGING VALUATIONS WHEN MONEY IS INFINITELY SUPPLIED OUT OF THIN AIR BY CENTRAL BANKS