Understanding the constant change in price on the stock market chart
The stock market appears very scary to a lot of people because there is no knowledge about how price changes, the change in the stock market price can be really funny sometimes, what may appear to be $4.3 now could change to $4.5 the following minute, this may even result into an argument among traders if the business model is not properly understood. Through this post, I will be giving a quick explanation on how the stock market price is majorly affected.
The price displayed on the headline stock price is usually mistaken for the price that stock could be sold or purchased, but contrarily the displayed price only shows the price the last transaction was carried out and this does not mean a trader will be able to perform transaction at the same price displayed.
The moment you purchase the stock of a company, you become one of the shareholders of that company whilst you maintain the shares. Irrespective of how little you invest into purchasing shares you are still a shareholder in the company. A company may have hundreds of shareholders each owning a little portion of the business.
How companies generate cash flow.
Cash flow is generated into a company when the demand for the product of the company is received properly by the market, the more sales is made the better cash flow returns the company generates. If the company is a privately owned company, every of the returns from the cash flow goes into the pocket of one person or a particular family as the case may be, but if the company is public with various investors, the cash flow returns will be shared among all the investors according to the amount of shares bought.
How the price of the stock market is determined.
Before making an investment in a company, there is usually a displayed future value, this future value signifies the worth of the company in few years or decades to come, bearing the future value in mind, as an investor every portion of share you want to buy must come at an amount that is below the future value, if you purchase stock at an amount above the speculated future value that means such investor is prepared to run at a loss.
The moment a major investor purchases the stock of a company, the price is immediately affected and at this point a small investor may consider the inflated price a good way to immediately sell off his own portion of the stock, but a major investor does his calculations correctly and the moment he speculates a drop in the price of the stock, he quickly removes his fund before every other person finds out and this will result in bringing the price of the stock. The effect of a major investor has a strong power in determining the price of stock.
I hope you find my post helpful, please let me know what you feel through the comment section, you can also up vote thank you.
When it comes to investing, it is better to gain proper knowledge of the system first, I am not good with market but I have a trusted friend that guides me through stuffs like this, thank you for this explanation though it is going to help.
Thank you very much for reading.
@tipu curate
Upvoted 👌 (Mana: 16/20 - need recharge?)
Understanding the stock market is very easy but requires time. The stock market is different from the company's revenue. The last price of a stock is the price paid to either buy or sell the stock.
Thanks for sharing this.
Thank you @gbenga, I appreciate the nice contribution.
Like you have correctly mentioned, the change in price of stock exchange is scary, I believe your analysis will help us have a more clear understanding of the reasons for that.
I have tried to provide clarification on that.
The market is very unstable as it is controlled by several factors which buyers and sellers take into consideration.
Thank you.
The stock market is a very tricky one but so many are making profits from it also, we just need to have a clear understanding about the system.
The reason why I decided to contribute in my own little way.