What Is Better Measurement For Stocks The Djia Or S&P How Are Share Prices Measured And Why Do They Change?

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How Are Share Prices Measured And Why Do They Change?

In Australia, stock market performance is measured by the S&P/ASX 200 Composite index, which has recently replaced the All Ordinaries index, commonly known as the All Ords. The US equivalent of the S&P/ASX 200 Composite Index is the Dow Jones Index.

The S&P/ASX 200 Composite Index is a measure of the 200 largest and most frequently traded shares in the Australian stock market. Measuring their rise and fall allows us to have a fairly accurate reading of how things are going in the Australian market as a whole.

Every major stock market around the world has its own index that helps investors gauge how the market is doing, as well as a number of sub-indices such as the industrial index, gold index or resource index that measure specific sectors.

Certain forces shape stock prices. Understanding these forces can do more than help you formulate an investment strategy—it can also help you see how events can affect everything from the unemployment rate to interest rates.

Below are some of the factors that affect the price of a stock:

* Supply and demand

* Financial status of the company

* Financial health of the industry

* Economic trends

And always remember that the two main drivers of the stock market are greed and fear. This is sometimes called the Lemming Syndrome – when there is a hiccup in the market, all the inexperienced traders jump off the cliff one by one in a panic. And when stocks are hot, all the lemmings buy them in droves, no matter how expensive they get.

Smart and experienced traders do not follow Lemmings. They have their own stock trading strategy that they follow and they also know that a market dip can sometimes be the best time to make money.

Of course, no one is immune to arrogance and stupidity, so there are no perfect strategies, because there are no perfect people. All you can hope for is to do your best to the best of your ability. That’s why a good trading education is so important – without it, you’re running on gut feeling and that’s almost a guarantee of failure.

Here’s a fun exercise you can try. Track the performance of the stock market and see what happens when important events occur, such as natural disasters, financial successes of major companies or strong economic growth. You can usually draw a graph that shows a strong correlation between world events and how they affect the stock market – it’s pretty amazing.

In fact, if you like your story and want to do some research, go back and look at old stock market performance and see where they rise or fall as a result of external forces. Wars, famines, corruption and so on can be related to market fluctuations.

Ultimately, the lesson to be learned is that the stock market is driven by people, and as I mentioned above, people are not perfect. Greed and fear can affect us all at some stage. In our examples, you’re just seeing it happen on a larger scale. Really makes you think about how “funny” we humans are…

Don’t be a lemming! Get a solid trading education, develop a solid trading strategy, and don’t let your ego get the best of you, and your odds of success will dramatically increase compared to Lemmings…

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