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How stock market works

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1How stock market works Empty How stock market works Wed May 18, 2011 10:23 am

ipoguru


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

This is my view . Note that I am a beginner. Please add your comments so that we all can understand how system works

It consists of professional traders (high networth individuals, Institutions ect ) and public.

Professional traders consists of very small percentage of the total count in the market yet they contribute to a quite high (about 40% I guess) market cap. Professional traders employ high caliber of stock analysts,get insider information and do stock trading for living.

On the contrast public consists of larger percentage of total count (more than 95%) and contribute to a about 60% of market cap. Public trade rather casually and trading is not their means of living.

Professional traders always has the edge.They manipulate the market and make the price high and sell at the peak. To do this they use all kind of propaganda. Use newspapers, forums, and any kind of means. after they sold their shares they produce another rumor or news articles and let the price go down. after making the price down and collect enough at the lower level again start a rally. In the second time they may not be playing with same set of people. Professional traders may not win all the time but they win at least 90% of the time.
So it is the public loosing most of the time. I think 90% of the public looses. Some quit and new set of people arrives and the story goes on.
All joining new wants to be the wining 10% but few succeeds.

If you can invest and monitor price for few years you get quite a good chance to get reasonable return (more than fixed deposits). Here also need to be careful not to buy at the peak.

if you are going to play the game with professional traders (Insider traders) you should know that you are at a very big disadvantage. You may win but the probability is very less.








2How stock market works Empty Re: How stock market works Wed May 18, 2011 8:36 pm

milanka

milanka
Vice President - Equity Analytics
Vice President - Equity Analytics

This is a post by Tabul , under expo lanka price. Its related to this post also..

tubal wrote:The following is a figment of my imagination:

EXPO will open at 100. It's quite easy. Someone has to enter a sell order at 100 and someone else has to enter a buy order at 100, and those orders will be matched and open will be marked as 100 (See how SLTL opens at 60 or 61 almost everyday while it's trading range is 55-58)

When EXPO opens at 100 the kind of people who bought WAPO at 10,000 and ALUF at 192 will barge in and buy like crazy while WAPO themselves start selling their stakes. This will probably drive the price down to about 80.

At 60, another bunch of investors, the kind of people who bought TAFL at 240 will wade in thinking 'damn, this looks attractive it's trading 10 bucks lower than the open'. Then JKH will start selling driving the prices down to about 60 (1000% profit).

When price reaches 60, the kind of people who paid 350 for JKH shares last year will enter the share ('damn 40% down from the open right?'). By now those who bought above 90 will be really worried. Other people who subscribed to the IPO will now start selling, driving the price down to about 30

At this stage normally sane investors who refuse to touch CARE at 250 or CSF at 15 will think, damn this is down 70% guess it's safe now. But their buying will not be enough to hold the prices steady. People who bought in the first half hour are now on the verge of jumping out of building. Meanwhile the market closes at 20

Over the next few days the share price gradually declines to 14. All those who bought above 75 will now sell absolutely disgusted, wowing never to buy on emotion again. The price will now drop below the IPO price. Suddenly JKH, WAPO etc will start buying back the shares they sold at 100 or even 50. The price will then start moving up and the retailers who bought at 90 and sold at 15 will scramble to get back on board. The cycle will continue once again.

http://forum.srilankaequity.com/t3537-expolanka-first-day-price#25017

http://forum.srilankaequity.com/u188

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