There is a lot to a stock’s price, and when I think back all those years when I began to learn about the stock market, reading a stock price took some consideration.
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 of this and more will be answered in this 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 stock price elements. The example we will use is from the NASDAQ Stock Exchange.
What is Stock Price?
A Stock Price is the quoted cost of a portion of equity or single stock in a publicly listed company. Each stock is a share of ownership in a company; this is why Stocks are also called Shares. The movement in stock prices is determined by the last executed trade between the seller and buyer of the specific stock.
What is the Difference Between Stock Price and Share Price?
Fundamentally there is no difference between the term “Stock Price” and “Share Price.” The term “stock price” is used in the US A and Canada. The term “Share Price” is used in the UK, India, and Europe. They are both fully interchangeable and mean the same thing, which is the price of a given portion of the equity in a publicly listed company.
What is the Last Price in Stock Market Terminology?
If a stock is currently trading, meaning the exchange on which it is being traded is open, you will see the Last Price. This is the price at which the stock last changed hands from seller to buyer. So, if the seller asked $2.50 for one share and the trade was executed, the Last Price is $2.50.
The Last Price changes with every executed trade.
In the US stock markets, prices are quoted in $ US Dollars. So, if you trade in the US, you will see a stock price of $2.21.
How to Read London Stock Exchange Prices
One important thing to note is this example is from the LSE, the London Stock Exchange.
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).
What is “Trade Time” in Stock Market Terminology?
The “Trade Time” is the time of day when the last share or stock was traded in the publicly listed company. The trade time can be useful to help you spot a stock that is very thinly traded, meaning it has a lack of liquidity or buyers and sellers. It would be best if you avoided shares that have low liquidity because you might have difficulty selling the stock because of a lack of buyers.
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Stock Price: What is the Percent Change?
In stock market terminology, the Percent Change or % Change is the difference between the previous trading day’s closing price and the current price (Last Price). The Percent Change indicates the increase or decrease in the Stock Price since the previous trading day.
In the example above, British Airways has increased by 2.55% since the previous day’s close.
Stock Price: What is the Previous Close (Prev Close)
The Previous Close is the selling price of a particular share on the last transaction of the previous day’s trading. Essentially this is the final “Last Price” of the previous day’s trading.
Stock Price: What is the Open?
Interestingly, 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 opening by 0.2%. Essentially, it is the difference between the Open Price and the Previous day’s Closing Price.
What is the Bid Price?
The Bid Price is the price a buyer bids to buy a stock. The Bid Price is the current market price offered for the stock. A stock exchange is like an auction, with an Asking Price and a Bidding Price. So if you were to sell the stock now, you would get the price you asked as long as the bidder is willing to pay it. 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.
What is the Ask Price?
The Ask or Asking Price is the opposite side of the trade to the Bid Price. If you want to buy stock, this is the price that someone else is ASKING for it. The Ask is the current price 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.
What is the Stock Price Spread?
In the case of Netflix on the Nasdaq 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 each 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’s fee, which you will pay per trade to your broker, for example, the $4.99 per trade that goes to TD Ameritrade or other discount brokers.
Large Bid / Ask Spreads Warning
Stocks with a large spread can be a problem. It tells you two important things:
- The stock might not have a lot of liquidity; therefore, it may be harder to sell at the price or time you wish to.
- Suppose you do buy a stock with a large spread, for example, over 2% of the stock price. This means you would need to make a profit of 2% on the stock just to break even.
So be careful about the spread.
Stock Price: What is the Days Range?
The Day’s Range is the price range within which the stock price moved up or down for the current trading day. For example, if Amazon had the highest sell price of $2,200 for the day and the lowest sell price for the day was $2,000, the days range would be 10%.
What is the 52 Week Range?
The 52-week range is the value between which the stock price has moved over the last 52 weeks of trading. This is not the last calendar year; this is the previous 52 weeks from today. Investors assume that if a stock is close to its 52-week high, it is overbought; conversely, if close to the 52-week low, it might be undervalued.
What is a Good 52-Week Range?
There is no good 52-week range. Some traders seek to buy stocks at the height of the 52-week range as they expect a pull-back. Other traders buy at the height of the 52-week range expecting a stock price breakout to new highs. A good 52-week range depends on your personal trading or investing style and strategy.
What is Volume in Stocks?
Volume is the actual count of shares/stocks traded in a given timeframe. The volume on a daily chart represents the number of stocks that change hand that day. High volume and a decrease in stock price is a bearish signal in stock analysis. According to analysts and supply and demand theory, high volume and an increase in stock price are bullish.
What is a Good Volume for Stocks?
A good minimum volume for a stock is typically 1 million stocks traded on a given day on average. Good volume means good liquidity, meaning there is enough money to keep the bid-ask spreads tight. This means you can usually sell for the price you want at the time you want. If there is low trading volume and many gaps in stock price bars, this is a low volume warning sign.
What Does it Mean if a Stock is Liquid?
If a stock is liquid, it means that there is plenty of money lubricating the trading of the stock. For example, if many people exchange the stock daily and money flows in and out of the stock, it is deemed highly liquid. This means a low bid/ask spread and better trading conditions, as you can easily liquidate your stocks when needed.
U.S. Stock Price Example
In this stock price example, we use a quote from the NASDAQ stock exchange.
What is the Previous Close?
In this example, the close price is $164.53, 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.
What is Stock Price 52 Week High/Low?
The 52-week high-low is a useful indicator to show the range of trading in the last year, the Highest and Lowest levels of the stock price.
What is Market Capitalization? (Market Cap)
The market capitalization is the stock’s last price multiplied by the number of outstanding shares. For example, if my company has 1 million shares, and the closing price of the stock yesterday was $10, my business’s value (market capitalization) is $10 Million.
What is the PE Ratio? (Price to Earnings Ratio)
The PE Ratio is calculated by dividing the Price per Share by the actual last reporting earnings per share. This is a very important measure of the relative pricing of a firm. Read more on the P/E Ratio here.
What is the Current Yield?
The current yield is the Dividend per share divided by the number of shares. So, if you have one share work $10 and the company pays a dividend per share of $1, you will have a dividend yield of 10%
Why do Stock Prices Change?
Stock prices change due to supply and demand pressures from the market participants according to the following rules:
- If Supply is equal to Demand – Stock Prices Remain the Same.
- If Supply is greater than Demand – Stock Price Drops.
- If Demand is greater than Supply – Stock Price Increases.
Why Do Stock Prices Change? Example
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 than people need. This means the supply of pineapples is higher than the 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.
Why Do Stock Prices Go Up?
Stock prices increase because the people who want to buy a share of that company believe that the company is worth more than the current price. If the number of people who believe the company is worth more than the current price (Demand) outweighs the number of people who believe it is worth less (Supply), then the stock price will rise.
If Demand is greater than Supply – Stock Price Increases.
Why Do Stock Prices Go Down?
Stock prices decrease because the people who want to buy a share of that company believe that the company is worth less than the current price. If the number of people who believe the company is worth less than the current price (Demand) outweighs the number of people who believe it is worth more (Supply), then the stock price will rise. Meaning they are more sellers than buyers
If Supply is greater than Demand – Stock Price Drops.
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What determines a stock price in the short term?
On any given trading day, a stock’s price is determined by what it sells for. This means when a sale is completed, that is the LAST PRICE the stock was sold for. The Next Price of the stock will be what it sells for in the next transaction, either the bid price or the Ask price.
What determines a stock price in the long term?
The direction of a stock price’s movement over the long term is how well the company is doing. If a company is making great profits, paying dividends, or has a stellar future (and the market participants believe it), the stock price will rise.
If the company has poor financial performance, low profits, or poor products, the company will be deemed by the shareholders to be worthless; therefore, sell the shares, and the price will drop.
Stock Price: Summary
So what is in a stock price? Quite a lot, actually. Remember three things:
- BID to get RID (the price you will get when you sell a stock)
- ASK to BUY (the price you will pay when you buy a stock)
- Be careful of large stock price spreads, as this can mean there is not a liquid market with enough buyers and sellers.
- The Price Earning Ratio helps you judge the relative value of a stock compared to its peer in the same industry.
- The spread is the difference between the bid and ask; this is quite often what the market maker or market-making system will earn to facilitate the trade.
- Stock Prices move because the equilibrium between demand and supply (buying and selling) is unbalanced.
Now you know about the stock price, why not see if the stock market is open today using our calendar?
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You want to be a successful stock investor but don’t know where to start.
Learning stock market investing on your own can be overwhelming. There’s so much information out there, and it’s hard to know what’s true and what’s not.
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I believe this is all in USD
Hi Barry, my husband is looking at investing in cryptocurrency (cardano) and I want to ask if the price currently at 1.020 (gbp) is 1p or is this different being a USA company?
Thanks
Hi Julie, it is 0.125 pence.
So if aUK share price is 0.125 how much is that in pence if it’s less than a penny??
Hi Sully, how about this extract from the book “Economists generally argue that stock price movement is essentially random and that when you trade stocks you are simply gambling. They state that the history of price has no bearing on the future stock price. However, we know randomness does exist but only in the short term (minutes to days time-frame). ”
https://www.liberatedstocktrader.com/stock-market-training/
Dont forget we have 248 free lessons that might also contain information you do not know.
https://www.liberatedstocktrader.com/free-stock-market-training/
thanks for the great question.
Barry
Hi Barry, I am interested to learn more about the paid courses…however I just dont want to waste money with things I already know.. so can you personally show me or tell me, something I would not know? Something advanced like yourself would use or knowledged in? This will prove that it worth taking the paid courses.
Yes we have a free training course here. https://www.liberatedstocktrader.com/free-stock-market-training/
thanks Chris, I am glad you liked it
This is a great thread for myself as a beginner running an isa account and looking over the FTSE 100 currently !
Thank you for your general basic knowledge , are the video tutorials amongst other formats of tuition here free ?
Hi Razia, I think this article answers your question https://www.telegraph.co.uk/money/jessica-investigates/have-eurotunnel-shares-gone/
Hi Barry my late father owned euro tunnel shares. I know my father invested in many thousands of pounds when they were launched as he had a theory that because to government were involved in this venture they would not go bust. How wrong his prediction was as I enquired over the number of shares he had and their value, I was schojed to learn that hadbchanged hand and name. They were now worth nothing more then few pounds in total. Can you advise me whether they are worth cashing in or what I can do next if anything. Thanks Raz
Hi Ivor, as mentioned in the article, in the UK 235 will mean 235 pennies or 2.35 GBP. Seems you got lucky
Barry
Firstly, I am not a trader, however can you clear a question I have, Around two years ago I bought some penny shares for a future chance investment for each of my Grandchildren. (years to go yet) They were at the time around 2p each and were called Renueron (Rene) I have not looked at them or had an interest myself until I heard their name mentioned in a recent activity. Now comes my problem, when I checked these shares they are now marked at 235.00, this is deceiving, surely they are not £2.30 or even 23.5pence. I am assuming that the decimal point is after the 2, am I correct ? If so, then future investors learning, have a muddy field to negotiate. or is there another explanation ? Thanks IVOR
HI Neil, good question, there will be multiple bids for a specific stock, and it is normal that the bids are at different prices. It is in the interest of the seller to take the best price for their stock. This select of the best bid and ask prices are what moves the stock price for the next bid and offer.
thanks
but if the bid price is the price any share owner will get if he wants to sell, then how does this figure change?
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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.
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…?
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
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
Hi de murph, stop loss orders are usually filled when the stock price moves through the value you have specified.
how to fill stoploss orders
Really Gr8 ! Thanks For sharing..