What kind news or information would make the price of a stock go up?
There is a highly related question which is much easier to answer: what normally value-increasing news about a company would cause that company to fall in value in the public stock market? By answering that, we can answer your question by proxy. The answer to that question being: anything that makes investors believe that the company won't be able to maintain the level of profit. For example, let's say a company announces a 300% profit growth compared to the previous year. This should push the stock upwards; maybe not by 300%, but certainly by quite a bit. Let's also say that this company is in the business of designing, manufacturing and selling some highly useful gadget that lots of people want to buy. Now suppose that the company managed such an profit increase by one of: In scenario 1 (firing the engineering department), it is highly unlikely that the company will be able to come up with, manufacture and sell a Next Generation Gadget. Hence, while profit is up now, it is highly likely to go down in the months and years coming up. Because stock market investors are more interested in future profits than in past profits, this should push the value of the company down. In scenario 2 (selling off the machinery), the company may very well be able to come up with a Next Generation Gadget, and if they can manufacture it, they might very well be able to sell it. However, no matter how you slice it, the short-term costs for manufacturing either their current generation Gadget, or the Next Generation Gadget, are bound to go up because the company will either need to rent machinery, or buy new machinery. Neither is good for future profits, so the value of the company again should go down in response. In scenario 3 (their product getting a large boost), the company still has all the things that allowed them to come up with, produce and sell Gadgets. They also have every opportunity to come up with, manufacture and sell Next Generation Gadgets, which implies that future profits, while far from guaranteed, are likely. In this case, the probability remains high that the company can actually maintain a higher level of profit. Hence, the value of the company should rise. Now apply this to a slightly more realistic scenario, and you can see why the value of a company can fall even if the company announces, for example, record profits. Hence, you are looking for news which indicate a present and sustained raised ability to turn a profit. This is the type of news that should drive any stock up in price, all else being equal. Obviously, buyer beware, your mileage may vary, all else is never equal, nothing ever hits the average, you are fighting people who do this type of analysis for a living and have every tool known available to them, etc etc. But that's the general idea. You should not trade based on what news is just released, if you try you will be too slow to react most of the time. In many cases the news is already priced into the stock during the anticipation of the news being released. Other times as soon as the news is released the price will gap up or down in response to the news.  Some times when you think that the news is good, like new record profits have been achieved, but the share price goes down instead of up. This may be due to the expectation of the record profits by analysts to be 20% more than last year, but the company only achieves 10% more than last year. So the news is actually seen as bad because, even though record profits, it hasn't met expectations. The same can happen in the other direction, a company may make a loss and the share price goes up. This may be because it was expected to make a 50% loss but only made a 20% loss due to cost cutting, so this is seen as a good thing and the price can shoot up, especially if it had been beaten down for months. An other example is when the Federal Reserve in the USA put up interest rates earlier this month. Some may have seen this as bad news and expected share prices to fall, but instead prices rallied. This was actually seen as good news, firstly because it had been expected for a long time, and secondly and more importantly because a small rise in interest rates after many years of near zero rates is a sign of the economy finally starting to improve. If the economy is improving, that means more people will have jobs, more people will be spending more money, companies will start to make higher revenues and start to expand, which means higher profits and higher share prices. A better way to trade is to have a written trading plan and use technical analysis to develop a set of buy and sell criteria that you follow to the tea. Then back test your trading plan through various market conditions to make sure you get a positive expectancy.
When you buy a stock, the worst case scenario is that it drops to 0.  Therefore, the most you can lose when buying a stock is 100% of your investment. When you short a stock, however, there's no limit on how high the stock can go.  If you short a stock at 10, and it goes up to 30, then you've lost 200% on your investment.  Therefore shorting stocks is riskier than buying stocks, since you can lose more than 100% of your investment when shorting. because the price might go up, but it will never be as big of a change as a regular price drop i suppose... That is not true.  Stocks can sometimes go up significantly (50-100% or more) in a very short amount of time on a positive news release (such as an earnings or a buyout announcement).  A famous example occurred in 2008, when Volkswagen stock quintupled (went up 400%) in less than 2 days on some corporate news: Porsche, for some reason, wants to control Volkswagen, and by building up its stake has driven up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short. Then last weekend, Porsche disclosed that it owned 42.6 percent of the stock and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent. The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about €200, or about $265, to above €1,000. Your understanding of the stock market is absolutely correct theoretically. However there is a lot more to it. A stock on a given day is effected by a lot of factors. These factors could really be anything. For example, if you are buying a stock in an agricultural company and there was no rainfall this year, there is a big chance that your stock will lose value. There is also a chance that a war breaks out tomorrow and due to all the government spending on the war, the economy collapses and effects the prices of stocks. Why does this happen? This happens because bad rainfall or war can get people to lose confidence in a stock market. On the other hand GDP growth and low unemployment rates can make people think positive and increase the demand in a stock driving the prices up. The main factor in the stock market is sentiment(How people perceive certain news). This causes a stock to rise or fall even before the event actually happens. (For example:- Weather pundits predicted good rainfall for next year. That news is already known to people, so if the weather pundit was correct, it might not drive the prices up. However, if the rainfall was way better than people expected it to be it would drive the price up and vice versa.   These are just examples at a basic level. There are a lot of other factors which determine the price of the stock. The best way to look at it(In my personal opinion) is the way Warren Buffet puts it, i.e. look at the stock as a business and see the potential growth over a long period of time.  There will be unexpected events, but in the long run, the business must be profitable. There are various ways to value a company such as Price to earnings ratios, PEG ratios, discounted cash flows and you can also create your own. See what works best for you and record your success/failure ratio before you actually put money in.  Good Luck, "When people (even people in the media) say: ""The stock market is up because of X"" or ""The stock market is down because of Y"", they are often engaging in what Nicolas Taleb calls the narrative falacy. They see the market has moved in one direction or another, they open their newspaper, pick a headline that provides a plausible reason for the market to move, and say: ""Oh, that is why the stock market is down"". Very rarely do statements like this actually come from research, asking people why they bought or sold that day. Sometimes they may be right, but it is usually just story telling. In terms of old fashioned logic this is called the ""post hoc, ergo proper hoc"" fallacy. Now all the points people have raised about the US deficit may be valid, and there are plenty of reasons for worrying about the future of the world economy, but they were all known before the S&P report, which didn't really provide the markets with much new information. Note also that the actual bond market didn't move much after hearing the same report, in fact the price of 10 year US Treasury bonds actually rose a tiny bit. Take these simple statements about what makes the market go up or down on any given day with several fistfuls of salt." "It appears that the company in question is raising money to invest in expanding its operations (specifically lithium production but that is off topic for here). The stock price was rising on the back of (perceived) increases in demand for the company's products but in order to fulfil demand they need to either invest in higher production or increase prices. They chose to increase production by investing. To invest they needed to raise capital and so are going through the motions to do that. The key question as to what will happen with their stock price after this is broken down into two parts: short term and long term: In the short term the price is driven by the expectation of future profits (see below) and the behavioural expectations from an increase in interest in the stock caused by the fact that it is in the news. People who had never heard of the stock or thought of investing in the company have suddenly discovered it and been told that it is doing well and so ""want a piece of it"". This will exacerbate the effect of the news (broadly positive or negative) and will drive the price in the short run. The effect of extra leverage (assuming that they raise capital by writing bonds) also immediately increases the total value of the company so will increase the price somewhat. The short term price changes usually pare back after a few months as the shine goes off and people take profits. For investing in the long run you need to consider how the increase in capital will be used and how demand and supply will change. Since the company is using the money to invest in factors of production (i.e. making more product) it is the return on capital (or investment) employed (ROCE) that will inform the fundamentals underlying the stock price. The higher the ROCE, the more valuable the capital raised is in the future and the more profits and the company as a whole will grow. A questing to ask yourself is whether they can employ the extra capital at the same ROCE as they currently produce. It is possible that by investing in new, more productive equipment they can raise their ROCE but also possible that, because the lithium mines (or whatever) can only get so big and can only get so much access to the seams extra capital will not be as productive as existing capital so ROCE will fall for the new capital." There's an interesting paper, Does Investor Attention Affect Stock Prices? (Sandhya et al), where researchers look at related stock tickers.  When a large cap, better-known stock jumps, smaller firms with similar symbols also rise.   Pretty nuts -- I interviewed the author of the paper [here](http://www.tradestreaming.com/?p=3745). There's also a transcript. "Investors are ""forever"" comparing the prices of stocks to other stocks. As others have pointed out, this is done faster and more frequently nowadays with high-speed computer programs. There may be no ""fresh"" news on stock A, but if there is fresh news on stock B (as there usually is), the news on B affects the COMPARISON with stock A. That could be what causes trading in stock A that has ""no news.""" People are trying ideas like this, actually.  Though they generally aren't very public about it.  While keshlam ventures into hyperbole when mentioning Watson, he is certainly correct human language parsing is a extremely hard problem. While it is not always true that the big players will know before the news (sometimes that would qualify as insider trading).  The volume spike that you mention generally comes as the news arrives to the major (and minor) players.  So, if you have an algorithm run after the volume spike the price will likely have adjusted significantly already. You can try to avoid this by constantly scanning for news on a set of stocks however this becomes an even harder problem.  Or maybe by becoming more specific and parsing known important and specific news sources (farm report for instance) and trying to do so faster than anyone else.  These are some methods people use to not be too late. Stock price is an indicator about the health of the company.  Increased profits (for example) will drive the stock price up; excessive debt (for example) will drive it down. The stock price has a profound effect on the company overall: for example, a declining share price will make it hard to secure credit, attract further investors, build partnerships, etc.  Also, employees are often holding options or in a stock purchase plan, so a declining share price can severely dampen morale. In an extreme case, if share prices plummet too far, the company can be pressured to reverse-split the shares, and (eventually) take the company private.  This recently happened to Playboy.