Have you ever wondered what all those flashing numbers that represent stock market prices are?
You’ve probably seen pictures of them in the news, in films or other media; sweaty faced men (and more increasingly women) with expressions of distress shouting and screaming at each other or down phones in front of large screens showing stock market prices.
This feature will show you what stock market prices actually mean.
Here’s a quick tip: when prices are shown in blue/green, it means that stock market prices are going up. When prices are shown in red, it means that stock market prices are going down.
For a start, you can forget about images of distress. This article is called ‘Basic Essentials’ for a reason; I just don’t do stress or stock market jargon, at least I try not to. Simplicity and positive psychology are written into my trading plan. They are necessary for my own continuing success trading the UK stock market.
As you know, I trade UK shares by spread betting them. That means that I trade the stock market prices of companies listed on the London Stock Exchange. The London Stock Exchange is a market like any other, but instead of selling fruit and veg, it sells and buys back shares from to the public as well as institutions such as banks. By way of an example, my local supermarket is open Monday to Sunday. Its opening times are:
- Monday – Saturday 08:30 – 20:00 and Sunday 10:00 – 17:00.
The London Stock Exchange is not open on weekends and bank holidays. Their opening times for trading shares are:
- Monday – Friday 08:00 – 16:30
In my local supermarket, I will find groceries, fish and meat, even insurance and banking products. The point is that I can buy goods and services and the physical premises of my local supermarket allows me to do this.
Similarly, The London Stock Exchange is the ‘supermarket’ at which I can buy shares. Unlike a supermarket however, the people who work at The London Stock Exchange called market makers will buy back the shares that I bought from them if they have risen in value and I want to make a profit.
If milk prices rose across the UK effecting the average carton of milk by 1p, you cannot then sell the milk back to the supermarket for 1p more than you bought it for. Can you imagine the queues of people clutching their out of date cartons of milk at customer service desks in supermarkets up and down the land?
More to the point, supermarkets show how much you can buy their goods for, usually on printed tickets placed into the shelf edge.
The London Stock Exchange shows two prices for each company: one is a buy price and one is a sell price.
Let us take a look at the buy and sell price of the UK’s largest listed company, BP:
(sell) 459.11 – 462.83 (buy)
Stock market prices can be found in a variety of places online for free and a quick search will yield dozens of results. Be advised that free sources of stock market prices online are delayed by anywhere between 15 – 30 minutes. I place my own trades after the UK stock market has closed using limit orders (jargon for telling my spread betting company to open a new spread bet for me the next day). This means that I never need to look at live stock market prices during the day. This is why I’m known as an ‘end of day’ trader.
The reason that stock market prices during the trading day are flashing blue and red is because traders, banks, hedge funds, insurance companies and others are constantly buying and selling shares in large quantities. This means that stock market prices are changing all of the time during normal trading hours.
Take the above quotation for BP. Since writing the two paragraphs above, the quotation for BP has moved to:
(sell) 460.09 – 463.81 (buy)
The price has risen since the first quotation because the buy price has risen by 0.98: 463.81 – 462.81= 0.98.
Because the price has risen since the first quotation, it should be showing in blue or green, although some free sources of stock market prices do not colour code rising and falling stock market prices.
What about all those flashing stock market prices?
When you see pictures on the television of traders staring/screaming at lots of blue, green and red flashing numbers, it means that they have placed dozens of quotations (stock market prices of individual companies) on their screens to look at. These types of traders are called ‘daytraders’ who look for quick profits buying and selling shares during the trading day.
This type of trading is not for beginners and I would not recommend it to anyone unfamiliar with financial markets; flashing numbers may look exciting, but why would you buy shares or open a spread bet just for the excitement of buying a flashing number on a screen? (unless you like gambling).
Each and every company listed on the London Stock Exchange will have a buy and a sell price whose movements will go up and down throughout the trading day. Some stock market prices will move faster than others, especially if a lot of people (banks/traders/hedge funds) are interested in the same company.
The easiest thing to remember is that stock market prices are buy and sell prices for individual companies listed on stock exchanges, not just in London but in New York, Tokyo and Sydney to name just a few.