How does a stock’s price increase?
Looking at the price in green have you ever wondered what happened behind the scenes?
In this writeup, we will discuss what factors affect the price of a stock and at the end, we will see a tool that we can use to shortlist a few good stocks. Don’t scroll to the bottom now!
The fluctuation in the price of a stock depends on various factors such as earnings, revenue, government policies, market sentiments, pandemic, and what not! This is a never-ending list and the reason why one might think that all this is just random. While all these factors have their respective roles, all they do is affect the demand and supply of securities being exchanged.
Let’s look into this a little further. The stock market is where securities are exchanged at a mutually agreed price. A bid is the price buyer is willing to pay in an effort to buy the security while ask is the price a seller is willing to accept for that security. Spread is the difference between the bid and ask.
Let’s understand this with the help of an example. Assuming a market where you are the only seller holding security and are willing to sell it for ₹10. Also, ten buyers are willing to pay ₹9 for this security. Since there is only one security, it's highly probable that some buyers might be willing to pay ₹10 hence raising the price of that security to ₹10. Here the ask is ₹10, the bid is ₹9, and since demand exceeds supply, price increases to what is being asked. In simple words increase in number of people willing to buy increases the price and an increase in number of people willing to sell decreases the price.
If you are still reading, let me ask you a question. Given a close estimate of demand can we make a judgment about the behavior of price tomorrow?
Keeping the same idea in mind I developed a tool where people can check out the top ten stocks which other people are claiming to buy the next day (or the next session)!
How to use this tool?
- Go to www.stockit.live.
2. Select a stock that you think you will buy tomorrow from the options.
3. You will now see a screen with the top ten stocks listed which people are claiming to buy in the next session!
4. Analyse the listed stocks and select the one that suits you best.