[85/100] Stock price fluctuations

Stock Price Fluctuation Patterns

1. Law of Supply and Demand (Core Principle)

Stock prices are determined by buying and selling forces

• More buyers willing to pay higher prices → Stock price rises
• More sellers eager to offload → Stock price falls

Essentially, all news, technical indicators, and fundamentals ultimately manifest as changes in supply and demand.

2. Trend Principle (Follow the Trend)

Stock prices typically exhibit three trends:

1. Uptrend: Higher highs and higher lows
2. Downtrend: Lower highs and lower lows
3. Sideways trend: Oscillates within a range

📌 Classic rule:

Once a trend forms, it usually continues until clear reversal signals appear

3. Volatility and Mean Reversion

• Short-term: Sharp price swings (driven by sentiment and capital flows)
• Medium-long term: Prices tend to revert to reasonable value
  This means:
• After big rallies → Likely to pull back
• After big drops → Likely to rebound

⚠️ But "reversion" doesn't mean immediate or necessarily back to origin.

4. Cycle Principle

Stock prices are often influenced by cycles:

• Economic cycles (recovery → boom → recession)
• Industry cycles (boom/bust)
• Market sentiment cycles (panic → greed)

Many stock movements reflect cyclical shifts rather than sudden company changes.

5. Sentiment Amplification Effect

Markets aren't perfectly rational:

• Good news → Often overbought
• Bad news → Often oversold

Hence common phenomena:

• Tops coincide with good news
• Bottoms coincide with bad news

6. Technical "Swing Patterns"

Common technical swing characteristics:

• Support and resistance levels
• Wave-like advances (rally-pullback-rally)
• Volume confirmation of trends

📈 Stocks rarely move in straight lines - they advance spirally.

7. Randomness and Unpredictability

Even with patterns:

• Short-term moves are largely random
• No one can consistently predict every fluctuation

This explains why:

• Risk control > Market prediction
• Discipline > Intelligence

In Summary

Stock prices "swing within trends and advance through swings",

Driven by supply/demand, cycles, and sentiment,

Valuation matters long-term; capital/sentiment rule short-term.