How Open Price Of A Stock Is Decided For A Day | The Complete Picture by THE STOCK MANTRA

Summary

The video script is an educational guide on understanding how stock prices are determined at market opening. It explains the process of order collection and matching during the pre-market session, the role of demand and supply, and the factors influencing the opening price. The script uses examples and scenarios to illustrate the decision-making process for investors and traders, aiming to provide clarity on market dynamics and the factors that can affect stock prices at the start of trading.

Takeaways

• 📈 The script discusses the factors that influence stock prices and how to predict opening prices on the market.
• ⏰ It explains the market opening process, detailing the difference between the free market station and the opening session, which starts at 9:00 AM and ends at 9:15 AM.
• 💡 The importance of understanding the first 8 minutes of the market opening is highlighted, where order collection occurs and how it sets the stage for price decisions.
• 📊 The concept of price identification process is introduced, which is how the market determines the opening price based on the highest volume orders.
• 📝 The script outlines the types of orders that can be placed during the market opening, such as limit orders and market orders, and the implications of leverage.
• 🔄 It describes the process of order matching that happens between 9:15 AM and 9:25 AM, which is crucial for determining the final opening price of stocks.
• 🚫 During the 4-minute period from 9:25 AM to 9:29 AM, no new orders or cancellations are allowed, which is a period of price fixing.
• 📉 The video mentions the role of institutional investors and mutual funds in influencing market prices during the opening session.
• 📈 The 'gap up' and 'gap down' scenarios are discussed, which refer to the difference between the closing price of the previous day and the opening price of the current day.
• 📝 The script provides an example of how to analyze the order book to determine the opening price of a stock, considering factors like supply and demand.
• 🌐 The video concludes with a reminder that market participants can take part in the opening price action and should stay updated with the latest market news.

Q & A

What is the opening time for the stock market and what are the different trading sessions?

The stock market opens at 9:00 AM and has two main trading sessions: the free market station from 9:00 to 9:15 AM and the opening session from 9:15 AM onwards where regular trading happens.

What is the purpose of the first 8-minute slot in the free market station?

The first 8-minute slot is for order collection, where limit orders and market orders are placed by investors and traders.

What is the difference between a limit order and a market order in the context of the stock market?

A limit order allows you to set a specific price at which you want to buy or sell, while a market order is executed at the best available price in the market.

What happens during the 4-minute slot from 9:15 AM to 9:19 AM?

This is the matching process where the orders placed during the first 8 minutes are matched to find the opening price of the market.

Why is the price discovery process important in determining the opening price of the stock market?

The price discovery process is crucial as it identifies the final opening price of the market by calculating the maximum credible quantity of orders placed at various price levels.

What is the role of the 3-minute period after the 4-minute slot?

This 3-minute period is for system checks to ensure there are no issues or backlogs before the market officially opens for regular trading.

How does the supply and demand factor influence the opening price of a stock?

The opening price is influenced by the balance between supply (sellers) and demand (buyers), with the maximum credible quantity determining the final opening price.

What is meant by 'other start' in the context of the script?

Other start refers to the remaining quantity of orders that are not matched or executed at the opening price, which is the maximum credible quantity.

How can investors participate in the opening price decision process?

Investors can participate by placing their orders during the free market station, which contributes to the supply and demand that influences the opening price.

What is the significance of the 'gap' mentioned in the script?

The 'gap' refers to the difference between the opening price and the previous day's closing price, which can indicate market sentiment and potential price movements.

What advice does the script provide for investors interested in the opening price of a stock?

The script advises investors to watch the complete video for a detailed explanation of how stock prices are decided and to participate in the market opening to understand the dynamics of price discovery.