Stock price movements can be reflected in historical charts and bid-offers formed on that day. If you are a stock trader who relies on stock price movements for trading, then your main decision to buy stocks is based on chart analysis & the bid offer.
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Actually the stock price movement (which is reflected in the charts and daily bid-offers) can reflect several important things. There are 4 important things about stock price movements that you need to know:
1. Prices fluctuate
Stock prices are always up and down (fluctuating). However, the rate at which each share fluctuates rapidly is different. There are stocks that fluctuate very quickly. There are stocks that fluctuate very quickly. There are stocks that fluctuate moderately. There are stocks that fluctuate slowly, even very slowly.
In general, the lower the liquidity of a stock, the fluctuating (up and down) stock price will be FASTER. Stocks with low liquidity often have a small nominal share price (under Rp500 per share).
On the other hand, the more liquid a stock is (there are many interested people), the stock price fluctuations will be LONG or limited.
Whether or not a share is liquid can be seen from the number of shares outstanding / market capitalization. In addition, you can see whether or not the stock is liquid from its daily movement and bid-offer queue.
That's why there are stocks that only fluctuate around 1-3%. But there are also stocks that can fluctuate up to 20% more in a day. This is because the stock price fluctuates differently, depending on the liquidity of a stock.
For a stock trader, this is important for you to understand as the basis for choosing stocks based on time frames and strategies. If you want scalping trading (trading minutes), choose stocks that are easy to rise quickly in a minute period.
Choose stocks that tend to be low in liquidity, because these stocks have the opportunity to rise quickly in the short term. If you want to do swing or intraday trading, choose stocks with stable fluctuations and try to avoid stocks with low liquidity, because the lower the liquidity, the higher the risk.
Stocks with low liquidity and high volatility are more suitable for scalping trading (hit and run, don't hold stocks for too long).
2. Stock quality
The stock price movement actually reflects the quality of the stock. Stocks that have good fundamental performance and are well-established (eg blue chip stocks), have good stock price movements and form patterns on their charts.
So the better the stock quality, the easier it will be for you to analyze and make trading/investment decisions.
Note that stocks that are crowded with enthusiasts (liquid), share prices tend to be more stable and are in great demand by investors. On the other hand, illiquid stocks, in fact there are almost no transactions, generally these stocks also have unclear fundamental performance (fried stocks).
If you are very concerned about the quality of stocks (especially long-term investors), then choose stocks with good performance and stocks that are easy to analyze, support-resistance and technical trends.
3. Opportunity
Stock price movements reflect opportunities. Stock ups and downs can be an opportunity that you can take to make a profit in trading.
But the opportunities for each share also vary depending on the fluctuating factors and the quality of the stock. The more stable and good the quality of the stock, the more chances you have to analyze and get the stock at a good price, because it is easier for you to analyze the stock, and vice versa.
4. Stock risk
Do not forget also that the stock price will not be separated from the element of risk. Every Share has the risk of falling prices. The risk of each Share is also different.
There are stocks that are low risk. There are stocks that are high risk.The higher the volatility of a stock, the greater the risk and vice versa.
As a stock trader, you should be able to judge that stocks that fluctuate quickly and have very little liquidity, then the risk of these stocks is high. If you are a typical conservative trader, of course these stocks should be avoided.
You must understand these four important things about stock prices, because these four things will be the basis for your analysis/consideration in choosing stocks according to your trading strategy and time frame.
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