Info about Stock Quotes
Understanding Stock Quotes
Stock markets are great avenues to make good money. If you pick the right stocks you can beat the market trends and make more money that what the markets made on an average. Typically when markets rally they do much better than the regular fixed savings tools like deposits. Hence the value creation in markets is much higher than traditional investment tools.
However, just investing in any stock will not get you there. You need to actively participate in the markets. You must understand that stocks tend to go through a cycle of highs and lows periodically. So ideally you should be buying at lows and selling at highs to make profits. Now once you sell a stock at a high price, you must look for the next stock in the low region and invest there.
However, the most important aspect of trading all these highs and lows is to understand the stock quotes first. Stock quotes are the current prices for the stock. This is not the actual price of the stock, but just an estimated value. So for example a stock quotes at $10 at this moment it means that you can sell the stock or purchase it at around $10. Typically if you are purchasing in bulk people tend to bid at lower price and it you are purchasing small amounts you may bid even more than $10.
The logic behind our quote is as follows. If you are bidding in bulk say 10000 shares at $9.5 when the current rate is $10, then you are effectively saving $5000 in the transaction. This is a significant savings. On the other hand, you know that the stock is really good and will go up in the coming days, but you are purchasing just 100 stocks. You can even bid at $10.5 because you just pay $50 more. But if you secure this stock and it goes up to $15 in next 5 months you would have made $500 on it. By bidding more than the stock quote, you ensured that you get the stocks. Chances are that if you bid for 100 stocks at $9.5 you may not have received any. So in the longer run you would have lost $500 trying to save $50.
Now coming to the stock quotes. In any active stock market various people would bid for varied number of shares of a scrip at different rates. There would be different rates for buying and selling. As people keep bidding their buy and sell price, there would be an overlap at some point and a trade is made. The last traded price of the stock is its stock price.
So it is clear that stock quotes are not based on any fixed formula but just the last traded price. O theoretically, if there is a stock whose value is $10 and a buyer and seller agree to sell it at $50, then the last traded price of the stock quote would jump from $10 to $50. But this would mean a huge loss for the buyer and hence it does not happen.