Understanding Stock Prices

Stock prices move every second during market hours, driven by the fundamental principle of supply and demand. Understanding why prices move is essential to making informed investment decisions.

When more buyers want a stock than sellers, the price rises. When more sellers want to exit than buyers want to enter, the price falls. This constant negotiation happens through an electronic order book maintained by the exchange.

The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). A narrow spread indicates high liquidity — the stock is actively traded. A wide spread suggests low interest or low trading volume.

Stock prices are influenced by multiple factors: company earnings and quarterly results, industry trends, macroeconomic conditions (GDP growth, inflation, interest rates), government policies and regulations, global market sentiment, and FII/DII buying or selling patterns.

Circuit breakers are safety mechanisms that halt trading when prices move too rapidly. In India, there are three levels: individual stock circuits (5%, 10%, or 20% based on the stock) and market-wide circuits at 10%, 15%, and 20% of the index.

The pre-open session (9:00-9:15 AM) uses a call auction mechanism where all orders are collected and matched at a single equilibrium price. This prevents extreme volatility at market open.

After-hours trading is not available in India. Any news that breaks after 3:30 PM gets reflected in the next day's opening price — this is called a gap-up or gap-down opening.