Why is it that the stock market can drop by 500 points but never seems to rise by 500 points?

Answer 1

It is unusual for the stock market to experience large increases or decreases in a given day but it does happen occasionally.

On 24 July 2002 the Dow Jones increased by 489 points (6.3%) and then on the 29th of July 2002 it increased by another 447 points for a total gain of 1009 points in 5 days (13.1%).

When the stock market goes down it tends to have a bigger psychological impact on investors than when it goes up.

Answer 2

The market can climb 500 points. It did after 1987. It dropped by 500 points one day and went back up several hundred points over the next few days. The precipitous drops are caused by computer aided selling. Some people have preprogrammed stock bottoms where the order a computer to automatically sell at that low.
Experts say "The market climbs a wall of worry." when people are the most worried, that is actually time to buy. let the market settle out a few days, and start buying shares you have researched. This is actually a buying opportunity if you have some cash to invest. buy a little at a time.

Answer 3

Different mechanisms at play. There's an old saying: Stocks go up via the stairs. And come down via the elevator.

For the stock market to go up, investors need to buy shares, i.e. part with their money, which most investors do reluctantly. So, markets rise slowly, or at least fairly orderly, without huge upswings of 500 point "up" days.

OTOH, for the stock market to go down, investors in general need to be selling their shares - either to lock in their profits, or to cover margin calls, which they will do in a hurry, because they are scared of losing their positions. In a falling market, you gotta' act very quickly to lock in your gains or avoid margin calls. So the market gets "sold" very swiftly, as investors unwind from positions to try to save their "bacon". It's a combination of fear and self-preservation at work.

As a result, a falling market can drop rapidly, sometimes violently, and 500 point drops are not at all unusual. The faster or lower the market drops, the faster investors have to unload shares or unwind from their margin positions, so it kind of feeds on itself, usually much more violently than in a rising market. That's why you almost never see "up" days of the magnitude of the "down" days.

Answer 4

Simple, it is difficult to part with ones hard earned money easily than get it into their own hand. Buying stock you will have to do the former and selling the latter. So if you buy slowly the index goes up slowly and when you sell fast to gain the index comes down fast.

Answer 5

Big moves in the market have been pretty rare of late but in the late 1990s were very common. Note that you really have to judge moves as percentages not as absolute points.

Answer 6

You can make money both ways. Just gotta play it right!

Answer 7

I am pretty much sure its because of Gravity!!
Amazing things can happen.

Answer 8

bad news is always worse than good news...... especially when it comes to money