Stock Price – 20 Things You Don’t Know (probably)

If you are new to the world of the Stock Market, one of the first things you have to learn is how to read a stock’s price.

This might seem really simple and rudimentary right?

Wrong!

This article will highlight 20 things you (probably) did not know about stock prices.

There is a lot to a stock’s price and when I think back all those years to when I began to learn about the stock market reading a stock price really took some thinking about.

For example what is the bid price?  What is the difference between the bid and the ask?

What does “Last Price” mean and what does all this have to do with the price of Pineapples?

All these questions and more will be answered in the following article.

Watch this Stock Price Video, or read the article below.

How much of the Stock Price Video did you understand?

Let’s go into the video in depth with a Step By Step explanation of each of the many elements of a stock price.  The example we will use is from the NASDAQ Stock Exchange.

1 – Stock Price or Share Price

Some people say stock price, some people say share price.  Some people buy stocks others buy shares.  Ultimately, the British and Australians say “Shares” and Americans say “Stocks”, they are both fully inter-changeable and mean the same thing.

2 – Stock Price : Last Trade

If a stock is currently trading, e.g. the Stock Exchange on which it is being traded is open, then you will see the Last Price.  This is the price at which the stock last changed hands from seller to buyer.  This changes often.

In the US stock markets prices are quoted in $ US Dollars.  So, if you trade US you will see a stock price of $2.21.

Stock Price, Bid, Ask, Open, Close
Stock Price

Interesting UK Stock Price Fact !

One important thing to note is this example is from the LSE the London Stock Exchange and stock prices here are quoted in Pence.  There are of course 100 Pence in a Pound.  This “Last Price” is not 221.50 pounds, but 221.50 pence, or approximately 2.21 GBP (Great British Pounds).

 

3 – Stock Price : Trade Time

This is the time at which the last share was traded.  Here you see 5:02 AM EDT (Eastern Daylight Time)

4 – Stock Price : Change

This is the difference between the last closing price and the current price (Last Price).  Here we see that British Airways has increased 2.55% since the previous days close.

5 – Stock Price : Prev. Close (Previous Close)

This is the stock price of the last transaction of the previous days trading.

6 – Stock Price : Open

Now it gets interesting.  The open price is the price at which the first share was traded for the current trading day.  Here we see that the share price opened at 219.9, but the previous close was 216.  This means the stock price gapped up on open by 0.2% (the difference between open price and previous close).

7 – Stock Price : Bid – The Price a Buyer Bids to buy a stock.

The Bid Price can be tricky to remember.

The Bid Price is the current market price offered for the stock.  So if you were to sell the stock now at “Market Price” you which get roughly this price per share 221.30.  The easy way to remember this is “BID TO GET RID”.  The BID is the price you would get when you want to get RID of the stock.

8 – Stock Price : Ask

The Ask or Asking Price is the opposite side of the trade to the Bid Price.  If you want to buy a stock this is the price that someone else is ASKING for it.  The Ask is the current price that it will cost you to buy each stock.  An easy way to remember this is “ASK TO BUY”

But why is there a difference?  If one person is selling the stock at BID 221.30 and another is buying the Stock at ASK 221.50,  there is a difference of 0.2 pence per share (in this case less than 0.1%).  This is called the spread.

9 – Stock Price : Spread

In the case of British Airways on the London Stock Exchange lots of shares are traded every day.  So the people handling the transaction between the buyers and the sellers have no problem finding matching partners for the transaction.  When a stock is traded a lot, it means it is very Liquid, or has a lot of Liquidity.  A very liquid stock generally means there is a low BID / ASK Spread.  When a stock is very rarely traded and the buyers and sellers cannot agree on a price to make a trade, then the spreads tend to be larger.

Where does this difference in the BID and ASK Price go?  The spread is usually the fee for the Market Maker / Broker or Specialist handling the transaction.  This is not the same as the Stock Broker Fee, which you will pay per trade to your broker, for example the $9.99 per trade that goes to TD Ameritrade or other discount brokers.

10 – Special Note on Stock Price Spreads

BEWARE : Stocks with a large spread can be a problem.  It tells you 2 important things:

  1. The stock might not have a lot of liquidity, therefore it may be harder to sell at the price or time you wish to.
  2. If you do buy a stock with a large spread, for example 2%.  This means you would need to make a profit of 2% on the stock just to break even.

So be careful about the spread.

11 – Stock Price : Days Range

This is the range within which the stock price moved up or down for the current trading day.

12 – Stock Price : 52 week Range

The 52 week range is the value between which the stock price has moved within the last 52 weeks.  Here we can see that the stock price for the last year has fluctuated between 130.80 and 255.80, so we know the current share price is towards the higher end of the 52 week range.

13 – Stock Price : Volume

Finally we see the volume.  This is how many shares have changed hands during the current trading day.  Here we see nearly 2.5 million individual shares changed hands today.

U.S. Stock Price Example

This the next Stock Price example we use a more recent quote for FaceBook (Ticker:FB) from the NASDAQ Stock Exchange

Stock Price - Facebook Ticker FB - Nasdaq Stock ExchangeStock Price - Facebook Ticker FB - Nasdaq Stock Exchange
Stock Price – FB NASDQAQ

14 – Today’s High / Low

The highest price the stock sold for today, the lowest price the stock sold for today

15 – Previous Close

This is $164.53 – this is the last price for the previous trading day.  If you look at the stock on a sunday, the previous close will be at the end of the trading day on a Friday.

16 – Stock Price 52 Week High/Low

This is a useful indicator to show the range of trading in the last year, the Highest and Lowest levels of the stock price.

17 – Market Capitalization (Cap)

This is the last price of the Stock multiplied by the number of shares outstanding.  For example, if my company has 1 million shares, and the closing price of the stock yesterday was $10.  The the approximate value (market capitalization) of my business is $10 Million.  In this example Facebook Inc is valued at a crazy $476 Billion Dollars.

18 – P/E Ratio (Price to Earning Ratio)

This is calculated by dividing the Price per Share by the actual last reporting earning per share.  This is a very important measure of the relative pricing of a firm.  Read more on the P/E Ratio here.

19 – Ex Dividend Date, Dividend Payment Date, Current Yield

As Facebook has not paid a dividend so far these fields are blank.

The current yield is the Dividend per share divided by the number of shares.  So, if you have 1 share work $10 and the company pays a dividend per share of $1, you will have a dividend yield of 10%

20 – Interesting Fact – Why do Stock Prices Move?

Imagine you live in the Caribbean and you own a Pineapple stand at the local market.

During harvesting season you have lots of pineapples to sell, in fact you have more pineapples that people to buy them  This means the supply of pineapples is higher than demand.  So, in order to sell all the pineapples and maximize your gross profit, you will reduce your prices to encourage people to buy more.

When the pineapple season is over, people still want pineapples but you have less to sell.

You still want to make a good profit, so you increase the price (Asking Price) of your pineapples.  Because there are more people who want pineapples and fewer pineapples available the price will naturally rise as people will bid higher (Bid Price).  This means there is more demand than supply.

Stock Price : Summary

So what is in a stock price?  Quite a lot actually.  Remember 3 things:

  1. BID to get RID (the price you will get when you sell a stock)
  2. ASK to BUY (the price you will pay when you buy a stock)
  3. Be careful of large stock price spreads as this can means there is not a liquid market with enough buyers and sellers.
  4. The Price Earning Ratio helps you judge the relative value of a stock compared to it’s pier in the same industry.
  5. The Spread is the difference between bid and ask, this is quite often what the market maker or market making system will earn to facilitate the trade.
  6. Stock Prices move because the equilibrium between demand and supply (buying and selling) is unbalanced.

 

Do you want a structured way to learn about the Stock Market?

If you wish to enroll for a Free Stock Market Training Course including free E-books and Videos, see the Trading Academy Free

If you wish to take a look at a Premium Stock Market Training Course – check out the Liberated Stock Trader PRO

The High Quality / High Resolution Liberated Stock Trader Pro    Training Course

Do you want the knowledge to invest with confidence?

Buy the Liberated Stock Trader PRO Training Package and receive 16 hours of video lessons and the Liberated Stock Trader Book - fast forward your future.

Guiding you through the maze of stock market investing to give you a uniquely practical and comprehensive knowledge of the 4 Pillars of Success

FUNDAMENTAL ANALYSIS - Learn how to analyze the health of the business climate and how to find great companies using our practical stock screening guide.

TECHNICAL ANALYSIS Chart Reading is not Voodoo, it is science. YOU will gain an incredible understanding of expert charting techniques, covering the most important methods, indicators and tactics, to enable you to time your trades to perfection.

MONEY MANAGEMENT Understand how many stocks to buy, when to buy them, how much to invest and when to sell using expert stop-loss strategies.

STOCK MARKET STRATEGY Develop your own stock market strategy and learn how to create your own winning stock system.

This incredible package includes:

  • The Liberated Stock Trader eBook - Over 200 pages of workbook covering every lesson
  • 16 hours of video lessons for PC, MAC, iPhone, iPad & Android phones

10 COMMENTS

  1. Thank you for sharing the information. Why the open price is difference from previous close price? In what condition this will happen?

    Thank you,

    Mitzi

  2. Hi Mitzi,

    the reason for the price difference between open and close, is that people trade in after hours markets. This affects price out of the normal market hours. Then when the market opens, it opens near the out of hours last traded prices.

    Great question thanks

  3. Hi Barry, thats absolutely great, it is much appreciated. I must say, a lot of my doubts are clarified now. Once again thanks.

    Barry, any ides, how many shares a company can publish as a public issue…?

  4. When you are starting out in the stock market,
    it is best to invest in what you know. The more familiar you are with a particular business or market niche, the better you will be at knowing
    whether a certain investment is likely to pay off.
    As you learn more, you can expand your investments.

  5. Excellent goods from you, man. I have have in mind your stuff previous to and you are simply extremely
    excellent. I really like what you’ve got right here, certainly like what you’re
    saying and the way in which you assert it. You make it entertaining and you continue
    to take care of to keep it wise. I can not
    wait to read much more from you. This is really a great website.

LEAVE A REPLY

Please enter your comment!
Please enter your name here