EasyEquities Blog

Understanding The Different Prices

Written by Cay-Low Mbedzi | Mar 11, 2024 10:00:00 PM

Stock prices revolve around key elements: Selling Price (Bid), Buy Price (Ask), Last Price, Average Purchase Price, Previous Close Price, and Delayed Price. Liquidity is pivotal, shaping bid-ask spreads and market stability. Excelling in buying and selling demands patience, discipline, and a long-term outlook anchored in value and investment goals.

Buy Price (Ask)

The Buy Price, also known as the Ask Price, is the price at which sellers are willing to sell their shares. This is the minimum price at which you can purchase a particular stock at a given moment. Think of it as the price listed on the shelf in a store - if you want to buy the item, you'll need to pay the listed price or negotiate for a lower one.

Selling Price (Bid)

Conversely, the Selling Price, or Bid Price, is the price at which buyers are willing to buy shares. It's the highest price a buyer is willing to pay for a stock at a particular time. This is like a shopper offering a certain amount for an item they want to buy - if the seller accepts, the transaction occurs at that price, with the process being more automated.

Last Price

The last price is the most recent traded price for the security. It gives investors an idea of the most recent price movement and is often used to assess the stock's current value. This price is constantly changing as trades occur throughout the trading day.

Average Purchase Price

The Average Purchase Price is the average price at which an investor has purchased a particular stock over time. It's calculated by adding up the prices paid for all purchases of the stock and dividing by the total number of shares bought. This metric helps investors assess their overall investment performance and can be useful for determining when to buy or sell additional shares.

Previous Close Price

The Previous Close Price is the price at which a stock ended trading on the previous trading day. It provides investors with a reference point for assessing how the stock is performing compared to the previous day's close. This price is often used as a benchmark for gauging daily price movements.

Delayed Price

The Delayed Price refers to the price of a stock that is not in real-time but delayed by a certain period. On EasyEquities, the delay is  15 minutes. While delayed, this price still provides investors with valuable information about the stock's recent performance, but it may not reflect the most current market conditions.

Access live prices on the EasyEquities platform using EasyCredits. Get a snapshot of live prices before buying or selling securities. Purchase EasyCredits directly from the platform with this guide.

Liquidity

Liquidity in the context of the financial markets refers to the ease with which an asset, such as a stock or bond, can be bought or sold without causing a significant change in its price. It's essentially a measure of how quickly an asset can be converted into cash without impacting its market price. Liquidity is influenced by factors such as trading volume, bid-ask spread, and market depth.

Liquidity tightens bid-ask spreads in active markets, widening in illiquid ones. Highly liquid assets stabilise prices, absorbing large orders without shifts, while illiquid ones face volatility from small trades. Liquid markets enable swift execution at prevailing prices, minimising costs, while illiquid ones may delay trades and offer less favourable prices. Liquidity enriches market depth, providing abundant trading options, whereas illiquid markets may lack depth, making it hard to find desired. 

In conclusion, understanding the dynamics of stock prices involves grasping key elements such as the Buy Price, Selling Price, Last Price, Average Purchase Price, Previous Close Price, and Delayed Price. These metrics provide crucial insights into market movements and investor sentiment.

Moreover, liquidity plays a pivotal role in influencing bid-ask spreads and market stability. In navigating the stock market effectively, investors must exercise patience, discipline, and a long-term perspective aligned with their investment goals and the intrinsic value of assets. Ultimately, mastering these concepts and principles can empower investors to make informed decisions and confidently navigate the complexities of the financial markets.