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Demand and Supply
The pricing of any product or service is fixed according to its demand and supply. For example, there is an art auction with just one painting for sale and a hundred buyers vying for it. In this case, the buyer with the highest bet gets the painting and that amount is set as the painting’s price. Alternatively, there are a hundred paintings at an art auction and just 10 buys. If none of the buyers bet a high price for the paintings then the painting goes to the least amount bet. The stock market also works in a similar way.
The more demand and less supply of something, the more the buyers are willing to pay for it. Hence, its price rises. The less demand and more supply of something, the less buyers want to buy it. Hence, the price of it decreases to make a transaction with the buyer.
How the stock market works?
The shares of any company are tradeable between 9:15 am and 3:30 pm every day. So some people might be selling those shares and some might be buying them. At any given point of time during this trading session, if there are more sellers than buyers of a particular share, then that share’s price in the stock market falls. Alternatively, if at any given point of the trading session, there are more buyers than sellers of a particular share, then that share’s price in the stock market rises.
What is BID in the stock market?
In this scenario, Bid is the highest price a buyer is willing to pay for one share at a given point of time.
What is ASK in the stock market?
On the other hand, Ask is the lowest price that a seller is willing to sell his one share for, at a given point of time.
What is SPREAD in the stock market?
The difference between Bid and Ask is known as the Spread. Generally the Bid and Ask prices stay close to each other. Having a wider Spread is not considered good for the company’s shares in the stock market.
One can easily view how many people are buying or selling a particular share at what time in the stock market. This is possible by just searching for the shares on Google or looking it up on a stock market app such as Upstox.
For more information on how share prices rise and fall in the stock market, check out the video below.
Also read, How To Check IRCTC IPO Shares Allotment?
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