Australian (ASX) Stock Market Forum

What influences stock price movements?

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cuttlefish said:
Coxy - just in case you are after something a little more basic - the price changes constantly throughout the day. The "price" is really just a historical record of the last trade that went through.

There are two queues - a bidder queue and a seller (offer) queue - the queue's are sorted by price first then within each price level its a first come first served arrangement.

A trade occurs when one of the bidders raises their price high enough to match the lowest price seller, or vice versa one of the sellers lowers their price enough to match the highest priced bidder. When that happens a trade occurs and that is now the price of the stock. Whether the trade was for 10 shares or 10 million shares doesn't matter.

So the price moves when there are bidders climbing over each other to buy, pushing the price up, or sellers climbing over each other to sell, pushing the price down.

What motivates those sellers or buyers to enter the queue or to climb over each other is another matter, but if there are more buyers competing to buy than sellers competing to sell the price goes up and vice versa if there are more sellers competing to sell than there are buyers competing to buy, the price goes down.

Thats the basic nuts and bolts of it in case thats what you were after.
Click to expand...

Im assuming that "at market" sell orders are matched to the highest bidder/buy order...i also
assume this is the main SP driver when panic selling gets going.
 
Its not demand
IT'S LACK OF SUPPLY

Think about it
Click to expand...

An increase in demand will always limit supply. Because supply is never infinite.

Though it is possible to artificially constrain supply by deliberately withholding goods from the market.

If we call the current 'lack of supply' the effect.

Then previous demand was almost always the cause.
 
fimmwolf-An increase in demand will always limit supply. Because supply is never infinite.
Click to expand...

will it though?
when demand increases, then prices will increase... when prices increase then people will want to supply more stock to the market at that higher price...
This explains the eb and flow of the market sometimes...
:cool:
.^sc
 
Very Interesting Web Site http://www.willain.com/index.html

Some very new/old(?) insight here...

What influences ----> expectations .

And it is ALL speculations Not just TA but FA too
The Future is in both cases something up ahead that involves looking..


For an investor with a long-term view, the value is best measured in terms of growth, earnings, market strength, and so on. However, a trader can benefit by following the technical price signals that were discussed earlier. The striking difference between the two approaches is that long-term investors look at the future earnings growth, while traders look at past price levels.

Who is right? Our gut feeling is that future earnings growth expresses real value. However, past price levels express the market's interpretation at that time of what the future earnings growth will be. Past price levels only represent a speculation of future earnings growth. Therefore, for traders to look at past prices levels in order to predict future prices is highly speculative. What a trader is saying is that "the stock was more expensive yesterday. Therefore, it is now comparatively cheap". This measure, however, does not give him a clue whether tomorrow's price will still be cheaper.

However, what most people tend to forget is that buying and selling a stock mainly means dealing with other people. When you buy a stock, it means that you find it "cheap". It also means that someone else finds it "expensive".

This means that the concepts of "cheap" and "expensive" had better be measured against the group of traders who are active in the stock instead of against some other measure. Why is this? The simple answer is that on the stock market, we are not trading "reality", but rather the perception of that reality. Therefore, instead of talking about "cheap" or "expensive", we'd better talk about "expectation".


Indeed, nobody really buys a stock because it is cheap, or because it is a good stock. These reasons (and others) are rationalizations of the buying act. If it is not to cover an existing position, the only reason for a trader to buy a stock is because he expects the share price to increase. This trader expects to sell his position later at a profit.

In the stock market, you buy a stock because you want to resell it at a higher price. Your feeling about the expensiveness (the value) of the stock is intimately linked to your expectation to sell the stock higher or not. That expectation itself certainly depends on the stock price, but it also depends on other traders' expectations (you'll need to find a buyer).

We could say that a trader's expectation at time t of a further price increase is inversely proportional to the Return on InvesTMent (ROI) this trader is running at time t. This means that if you already have a 50% profit, for example, your expectation for a further profit increase is lower now than at the time you bought the stock when you had 0% profit.

I found out that the average ROI of the pool of active traders gives a good representation of the value of a stock as perceived by said traders.
Click to expand...


I found out that the average ROI of the pool of active traders gives a good representation of the value of a stock as perceived by said traders

This is one way of defining what is the cause that has an effect...

Another old way ( which interestingly I understand as the same way)

Is that the cause is a congestion zone on a P&F chart

Such that differences of opinion have resolved into a
"Value Zone" ie Accumulation------or into a "No Value Zone" ie Distribution


Both creating a cause that is expended in an effect
Such that--->

The expectation at time t of a further price increase is inversely proportional to the Return on InvesTMent (ROI) this trader is running at time t

ie The distance that price has moved from the defined congestion zone
defined by a pool of active traders ie smart money / CM.

Effective Volume seems a new/old(?) concept as well ( 1 min periods Vs 5 min ? )

An interesting site-------I have not read his Book--- You can see some S&P analysis on the sister site linked

The cause is Accumulation / Distribution
The effect is Mark up / Mark Down ( Which may or may not be tradeable =
eg just ?so-many? point gap which then can move back down or recycle higher...



motorway
 
Motorway while I agree with most of what you say and a lot of what is in the article, there is one section in that article that is worth noting:

In the stock market, you buy a stock because you want to resell it at a higher price. Your feeling about the expensiveness (the value) of the stock is intimately linked to your expectation to sell the stock higher or not. That expectation itself certainly depends on the stock price, but it also depends on other traders' expectations (you'll need to find a buyer).
Click to expand...


This comment is not necessarily true. There are investors out there that buy a stock for dividend yield or expectations of a future dividend. For me the ultimate goal in value investing is to find a stock that generates its own, increasing, income. The more income one can 'buy' at value prices the less 'work' one has to do in generating ones own income. This applies to other investment classes as well of course. There are definitely investors out there (far rarer) that genuinely have this as the primary goal in mind in asset selection for investing. (The old buffet/graham adage of Mr Market being irrelevant if you are looking to buy into a business its the future income/profit that counts - and value can definitely be realised by way of income at many times the actual share price.

(pithy example for demonstration purposes e.g. buy an oil spec for 20c, they hit oil and develop a field and start to pay a 10c/year dividend - its irrelevant what the price does - the income pays back the investment).

In a deep bear market this becomes relevant - when yields get up to 20% or more for example, an investment can be paid back and a return achieved relatively quickly through dividend streams. There will be more investors of this type as the bear market prolongs imo but it will take a while for the mindset shift to occur.
 
Monday 17 November 2008

Supply and demand are the ultimate arbitors.

Supply is one force, demand the other, and
each has its adherents. As to WHY one opts
for one or the other is beyond the scope of
an easy answer.

The market is comprised of individuals, [and
for the sake of argument, computerized
"decisions" initially were programmed by
individuals], and these individuals have an
infinite number of reasons for making a
decision to buy or sell.

A few examples as reasons to buy or sell:

*fundamental considerations
*technical considerations
*"informed" decision-making
*uninformed decision-making
*margin calls
*gut feel
* etc, etc, etc

The list can be exhaustive. The point is,
whatever be the impetus behind one's
motivation for making a buy or a sell decision,
it is the collective results of these opposing
forces that are distilled into the market place
that determines how price will be influenced.

It might be best to think of the forces of
supply and demand in terms of a market's trend
of price movment. In an up trend, the force of
demand is winning over the force of supply.

Within a major trend are smaller ones, corrections
within a trend, if you will. At these times, the
forces of supply are overcoming the forces of
demand, for the time being. I.e., supply is winning
a battle, while demand is winning the war.

The forces of supply and demand can be viewed
on a grand scale, in time, or a very short one, let
us say a single bar that reflects the opening price,
the high, the low, and where price closed.

Note that this bar can be annual, monthly, daily,
5 minute, etc, of any duration. What is depicted
on that bar is factual information about who is
winning the "war."

The easy answer is where price closes. If on the
upper range of the bar, demand came out ahead.
If on the lower portion, supply won. If in the
middle, it was a stand off.

Volume can be added to the mix, but that is another
issue, one that addresses the quality of input
between the waging forces of supply and demand.

Putting the results of the numerous outcomes into a
context, one that reveals a pattern, or lack of, is key
to understanding market behavior.

Whether the reason is one sounded only in a fundamental
analysis, based upon economy, company, sales,
prospects for improvement, or not...

Whether the reason is one stemming from a reading
of a chart, or the use of mechanical applications, like
moving averages, RSI, Elliott Wave, whatever...

Whether the reason is born from forced liquidation,
lucky guessing, showing off, ego, etc...

All of these comprise one element or the other, and
each do battle, at one time or the other, as they
exert their "influence" of buy/sell decision-making
in the expectation/hope of some outcome.

The aggregate is the compostion of most any market,
the collective, aka Supply v Demand.


Just a few thoughts.
 
The Edge said:
Monday 17 November 2008

Supply and demand are the ultimate arbitors.
Click to expand...

Well said...

Coxy: As someone pointed out earlier, why do you ask the question you asked? Is it for intellectural curiosity or practical trading strategies?

Even if you are able to find a satisfactory answer to what are the few "ultimate factors of influence", those are only of practical use if you can in turn predict the behaviour of these factors. I am guessing that will be no easier than predicting price itself.

A much simpler solution is to use the demand and supply numbers laid in front of you (i.e. order book) to give you some hint as to which way the price will go.
 
If Demand were the ultimate reason for price increase you would see prices only rise on increased volume.
That isnt the case,Price actually rises often on Low volume.
Supply devreases as people hold for percieved better prices.

Take a look at the increase in volume on down moves.
Note also the decrease in Volume on Up moves.
 

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This comment is not necessarily true. There are investors out there that buy a stock for dividend yield or expectations of a future dividend.
Click to expand...

For an investor with a long-term view, the value is best measured in terms of growth, earnings, market strength, and so on.
Click to expand...


Real Good growing dividend prospects (usually) = an appreciating share price away from the compelling price level----->reflected in the price action by a smart pool of traders ( value investors ?) creating a "value zone" by all taking advantage of Mr Market in a certain price range..... hence a trading range.

one bargain buyer....is a blip on a down trend
But the emergence of a "pool" of such buyers
or an elephant like Buffet
Stops a downtrend
and is the cause of a new uptrend

Even buffet likes to see $1 of owner earnings create $1 of market value.
( not exact quote )

What does the value buyer trade
in,when he buys and sells

Mr Markets-Expectations...

You know the quote


Cuttle----Yes , it is not ( like anything) a final statement on the ultimate reality---But a nice suggestive worthwhile look at The Mt Market side of things

This is well put,add in a Mr for the Value Investors :)

Still unwise not to be a expert on Mr Market
( less we are He:) )

However, past price levels express the (MR) market(s) interpretation at that time of what the future earnings growth will be.
Click to expand...

Today's bargain buyer can be tomorrow's panic seller


motorway
 
Supply devreases as people hold for percieved better prices
Click to expand...

This is one aspect of the "work" done in a trading range

It is not only about the transfer of actual Shares
From Weak to Strong

But the crystallizing of a new sentiment
the fortifying of weak into strong

A turning from a looking back
to a looking ahead

motorway
 
motorway said:
Real Good growing dividend prospects (usually) = an appreciating share price away from the compelling price level----->reflected in the price action by a smart pool of traders ( value investors ?) creating a "value zone" by all taking advantage of Mr Market in a certain price range..... hence a trading range.

one bargain buyer....is a blip on a down trend
But the emergence of a "pool" of such buyers
or an elephant like Buffet
Stops a downtrend
and is the cause of a new uptrend
Click to expand...

I completely accept the point that you are making - value cannot be perceived without factoring in price and thus its impossible for a value investor to say they 'don't care' about price - they do on entry at least - and value is always relative as well. So what is value today may appear very expensive tomorrow - it does all depend on how the market prices risk and perceives value.

My main point is that buyer motivation is not always price appreciation but dividend instantiation and appreciation - they are looking for their return via dividends not via price.

The general point of what you are saying of course still applies to both - relative values and sentiment also play a role in the price a yield driven investor will pay and may also impact a decision to swap into better yields as prices fall or to take their return via if price rather than yield if price happens to rise to the extent that yields are no longer perceived as value.

anyway ... excuse the waffling. :eek::)
 
Wednesday 19 November 2008

> If Demand were the ultimate reason for price
> increase you would see prices only rise on
> increased volume.

In general, and overall, that has to be true.


> That isnt the case, Price actually rises often on
> Low volume.

The conclusion asserted is non sequitur and
contradictory.


Price can rise on "low volume," once demand has
been established, and the trend is up, [exlcuding
trading ranges, to remain simple and clear.] The
lower volume, in an up market, reflects an absence
of sellers, [supply], so that what demand there is
controls, and meets little resistance in affording
price to rise.

> Take a look at the increase in volume on down
> moves. Note also the decrease in Volume on Up moves.

The chart used to illustrate the point to be made is
not clear, as the assertion is implied above.

Most generalizations tend to be false, including the one
just made, and the generalizations made about volume
in this instance also holds true for the opening point of
this sentence.

---
To another observation:

> My main point is that buyer motivation is not always price
> appreciation but dividend instantiation and appreciation -
> they are looking for their return via dividends not via price.

Well, the current melt-down would argue otherwise. How many
dividend-motivated buyers would give up their dividends if
only they could get their lost capital back?

The notion being made is understood. Those making it fail to
understand that it is not a stand-alone consideration. No
matter what the underlying motivation, preservation of capital
is always the primary concern.

While what has transpired over the short span of the past few
months may seem like a black swan to most, the myopic notion
"fundamental principles rule," as it were, reveals the underbelly
of a stance that is inherently flawed when perceptions change.

Not to seem cavelier, for no one could have known that the
decline would be as severe as it is, but a decline was evident.


Just one POV.
 
tech/a said:
If Demand were the ultimate reason for price increase you would see prices only rise on increased volume.
That isnt the case,Price actually rises often on Low volume.
Supply devreases as people hold for percieved better prices.

Take a look at the increase in volume on down moves.
Note also the decrease in Volume on Up moves.
Click to expand...

Trusty VSA principles!!!
 
The Edge said:
To another observation:

> My main point is that buyer motivation is not always price
> appreciation but dividend instantiation and appreciation -
> they are looking for their return via dividends not via price.

Well, the current melt-down would argue otherwise. How many
dividend-motivated buyers would give up their dividends if
only they could get their lost capital back?

The notion being made is understood. Those making it fail to
understand that it is not a stand-alone consideration. No
matter what the underlying motivation, preservation of capital
is always the primary concern.

While what has transpired over the short span of the past few
months may seem like a black swan to most, the myopic notion
"fundamental principles rule," as it were, reveals the underbelly
of a stance that is inherently flawed when perceptions change.

Not to seem cavelier, for no one could have known that the
decline would be as severe as it is, but a decline was evident.


Just one POV.
Click to expand...


There are different types of markets. A deep bear market in a deflationary (or at least non-inflationary) environment, where price and liquidity are dead, lends itself well to obtaining a return via income rather than capital gain.

This market hasn't established itself as that yet as we are still going through the first phase of this economic turmoil. There is still a risk of a monetary inflation causing a different kind of abberation in the market and inflation also has a different impact on capital. Preservation of capital is important but so is preservation of value. Capital and value are not always directly correlated and it is possible to lose value while preserving capital. It is not always possible to get the jumping between asset classes perfectly timed but there is often less risk imo in holding assets that have value and obviously price does not always equal value.
 

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