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

Soubhagya Sahoo - The Stock Mantra

22 Jul 202015:38

Summary

TLDRThe 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.

Outlines

00:00

📈 Stock Market Opening and Trading Strategies

The first paragraph discusses the dynamics of stock market opening and the factors influencing stock prices. It explains the difference between a free market station and an opening session, detailing the time frames and the types of orders that can be placed, such as limit orders and market orders. The paragraph also touches on the process of price determination during the opening session and the role of large investors and mutual funds in influencing market prices.

05:01

📊 Understanding Stock Price Determination and Market Factors

The second paragraph delves into the factors that determine stock prices, such as demand and supply, and the influence of sellers and buyers. It uses an example of a hypothetical company to illustrate how the opening price is set based on the maximum travel quantity of orders. The paragraph also discusses the concept of 'other start' for orders that are not filled at the opening price and the importance of understanding market dynamics for successful trading.

10:04

💹 Analyzing Market Opening Price and Investor Behavior

The third paragraph continues the discussion on how the market opening price is determined, emphasizing the role of maximum credible quantity and the behavior of retail investors. It explains the process of price selection based on the nearest amount to the last closing price and the impact of unfilled orders on the opening price. The paragraph also encourages viewers to participate in the market opening and to understand the importance of the opening price for successful trading.

15:06

📹 Engaging with the Educational Content on Stock Trading

The final paragraph serves as a call to action for viewers to engage with the channel's educational content on stock trading. It encourages viewers to subscribe to the channel for regular updates and to interact by liking, sharing, and commenting on the video. The paragraph also mentions the intention to provide daily educational videos on value appreciation, division, and educational topics, inviting viewers to stay connected for more insights.

Mindmap

Keywords

💡Stock Market

The stock market is a platform where shares of publicly traded companies are issued, bought, and sold. In the context of the video, it discusses how the stock market operates and the factors that influence the opening prices of stocks. For instance, the script mentions 'market open' and 'stock price decision,' indicating the process of determining the initial trading price when the market opens.

💡Opening Price

The opening price is the first price at which a security is traded after the market opens. The video script refers to the process of determining this price, highlighting its significance in stock trading. It is mentioned in the context of 'market opening statistics' and the 'price notification process,' which are crucial for investors to understand market trends.

💡Limit Order

A limit order is a type of financial order to buy or sell a stock at a specific price or better. The script discusses 'limit orders' in the context of stock trading, where it explains that investors place these orders to ensure they buy or sell at a desired price point, which is integral to the stock price decision process.

💡Market Order

A market order is an order to buy or sell a stock at the best available price. The video script touches upon 'market orders' as a type of order that investors can place, which is executed immediately at the current market price, contrasting with limit orders that specify a price.

💡Price Identification Process

The price identification process is a mechanism used in stock trading to determine the opening price of a stock. The video script describes this process, indicating that it involves calculating the final opening price based on the orders placed during the pre-market session, which is a key concept for understanding how stock prices are set at the market open.

💡Delivery Order

A delivery order in the context of the stock market refers to a transaction that settles in cash rather than the actual delivery of securities. The script mentions 'delivery order' to illustrate a type of order where the settlement is in cash, which is different from leveraged trades that involve actual stock positions.

💡Leverage

Leverage in stock trading refers to using borrowed capital to increase the potential return of an investment. The video script discusses leverage in the context of trading strategies, where it explains that investors can trade with more capital than they actually have, thus amplifying potential gains or losses.

💡Investor Behavior

Investor behavior refers to the actions and strategies of individuals or institutions when making investment decisions. The script alludes to investor behavior, particularly how large entities like mutual funds and foreign investors can influence the market by placing significant orders that can push the market price up or down.

💡Pre-market Session

The pre-market session is a period before the regular stock market opens where investors can trade shares. The video script explains the pre-market session, noting that it is a time when orders are collected and can influence the opening price of stocks, which is a critical concept for understanding market dynamics.

💡Price Notification

Price notification is the communication of the opening or closing price of a stock. In the script, 'price notification' is mentioned in the context of the process that determines the market's opening price, which is an important step in the stock trading process, informing investors about the starting price of the trading day.

💡Market Gap

A market gap refers to a situation where the price of a stock at the opening of the trading session is significantly higher or lower than the previous session's closing price. The video script uses the term 'market gap' to describe scenarios where there are significant price changes from one trading session to the next, which can be influenced by various factors such as news or investor sentiment.

Highlights

The session begins with a free market station and an opening session, illustrating the process from 9:00 AM to 9:15 AM.

Different types of orders such as limit orders and market orders are explained, detailing their role in the first 8 minutes of the trading session.

The importance of the first 8 minutes for order collection before the market officially opens is emphasized.

A detailed explanation of how the opening price is determined through a price identification process.

The role of demand and supply in the stock market and how it affects the opening price of stocks.

The impact of large entities like mutual funds and foreign investors on the market's opening price.

An introduction to the concept of 'other start' which refers to unexecuted orders that do not participate in the opening price determination.

The process of price fixation post the first 8-minute session, leading to the market's opening price.

The significance of the 4-minute period between 9:15 AM and 9:19 AM, where no new orders can be placed, modified, or canceled.

The role of the 3-minute period before the market officially opens for system preparation and order matching.

Explanation of the 'gap up' and 'gap down' market openings, which can occur due to significant pre-market news or large order imbalances.

The influence of market sentiment and pre-market indicators on the opening price of stocks.

A step-by-step guide on how to participate in the market opening and the strategic placement of orders.

The concept of 'maximum tradable quantity' and how it affects the selection of the opening price.

The impact of the previous day's closing price on the determination of the opening price.

A practical example demonstrating the process of identifying the opening price based on order books and quantities.

The importance of understanding market dynamics and the behavior of large players to predict market openings accurately.

The video concludes with a summary of key points and an invitation for viewers to like, share, and subscribe for more educational content.