Have you ever observed the Stock dealer’s screen having market operators glued to it with anxious, anticipating glances? The screen shows rows of figures in a dynamic state, changing instantaneously. Now, to analyze these figures closely, let’s go back to the definition of “market”. A market is a place where the sellers of a product (or service) and its buyers converge. The market forces of demand and supply determine the price at which the trades are affected i.e. the price at which the sellers are willing to sell the product and the buyers are willing to buy the product.
Similarly, the Stock Market is the place where the sellers and buyers of shares of companies trade and the same forces of demand and supply determine the price of trade. The share market provides an electronic platform, unlike the normal markets where the buyers and sellers are known.
The orders are placed and executed electronically through a stock exchange which gives its dealers electronic platforms to place bids to buy and sell. The stock exchange server maintains an order book for all the orders that its members place (whether buy or sell). The software determines the price of a stock based upon the demand and supply. Here is a simplistic example of how this is achieved. The stock of Company A is currently trading at $ 30.7800.
Buy orders Sell Orders
Shares Price Shares Price
600 30.800 800 30.7800
400 30.775 700 30.775
It can be seen above that the buy orders at this price (demand) is 600 shares while sell order (supply) is 800 shares. As supply is more than demand, therefore the price of the stock would fall. In this case, the next lower order is at 30.775.So the next instant price would be 30.775.
It must be noted that the order book is in a dynamic state and contains all the orders of the members. This is the microscopic view of changing demand and supply and corresponding prices of the stock. This is a very fast process almost taking fraction of seconds. In the real life, it is hard to make out such interaction and supply and the “stock quote” at any instant gives the price of any stock at any given time.
The price, volume and other details comprise the Stock quotes at that instant if the market is open or closing price if the market is closed. The other accompanied details apart from price are
Volume – The total number of shares traded
Closing price – The Previous Closing price.
There are other details as well. Let’s see a typical example of stock quote of Microsoft Corporation as on 19/06/2009
Last Trade – 24.07
Trade time – 4.00pm
Close – up 0.57 (up2.43 percent)
Previous close – 23.50
Day’s Range – 23.75-24.34
52wk Range – 14.87-28.92
Volume – 115,458,922
There are many websites that also give other parameters like EPS (earning per share) P/E price earning ratios etc. These data help to make competitive analysis of stock with respect to its past performance, stock of companies engaged in similar business and with respect to the main indices of the market.
