3 examples that uncover reasons of any price behaviour
The price reflects the commodity value in the economic theory. However, it is not always so on the exchange – it is rather an instrument of attracting investors and traders. An investor buys securities if he thinks that they are undervalued and would become more expensive in the future. Traders actively buy and sell assets hoping for a speculative profit. Traders do not care whether the price falls or grows – they are interested only in making money.
You may often come across the following statement on the Internet:
The price grows because there are more buyers and it falls because there are more sellers.
It makes no sense from the point of view of order matching. Financial assets are not taken from the thin air. For someone to buy futures or stock, it is required that someone sold them. The laws of demand and supply are still true for the exchange trading, however, the price movement mechanics on the exchange has its specific features.
The stock and futures prices change every second. It is practically impossible to predict the price movement on the exchange with 100% accuracy. But it could be forecasted with a certain probability using various instruments of technical and cluster analysis.
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