If you want to ask a difficult question of an investor, ask him or her how much it will cost when you are buying stock. You will probably get a few puzzled looks and then an answer something like, “That all depends." In the stock market, the truth of the matter is that once an IPO has ended, there are a number of factors that influence the price of buying stock and in order to understand stock price factors, you need to understand some of the variables behind them.



So How Much Does It Cost When You Are Buying Stock?

This is actually a very vague question. It is influenced by the variables that surround it. For example, MEW Industries is a leading producer of coffee, its common stock closed today at $15 per share. How much will it open for tomorrow? Again the answer is not concrete; for example, before tomorrow’s market could open imagine the results if one of these things occur:

•Panama, the location of MEW Industries coffee farms, is taken over by the recently released Manuel Noriega, severely impacting harvesting.

•The stock market news is buzzing when the President of MEW Industries wins the Nobel Peace prize.

•The American Medical Association finds that coffee cures cancer.

•It is announced that a plague of locusts has damaged the coffee crop.

Effect Of Opening And Closing Prices On Buying Stock

Typically, the price will open close to the closing price the previous day. However, stock price breakouts occur when those buying stock sense an event that could radically change the value of a company and its stock value. Factors that motivate those buying stocks include things that impact production, public perception and overall profitability. As a result, a company will likely see up or down movement in its stock price.

Conversely, the closing price of a stock can have an effect on the next day’s price. There tends to be a carry-over effect from close to open that reduces stock volatility. Without any significant Wall Street news overnight, the opening price and the closing price will likely be very similar.

A Fresh Start

Each day when the stock market opens, it is a new day. Those buying stocks will help to establish stock prices. A stock that was a strong buy yesterday may be sending off sell signals to savvy investors today. A stock that was struggling to day might be tomorrow’s hot stock. The key to the value of a share of stock is what someone is will to pay for it. If you pay $500 for Google stock, may want to buy a lot of it but you would buy the Brooklyn Bridge from a man on the street before you would pay $500 for MEW Industries’ stock. Remember, buying stock is a perception game. There were people who never thought Google stock would hold its IPO, let alone rise to over $500 per share. Like in life, beauty is in the eye of the beholder for those buying stocks.

An Honest Price For Buying Stock

Forget what you’ve heard. It’s not always about greed and fear! While it is true that emotional factors motive prices for the people buying stock, the market will always find the true value of a stock, giving advantages to those who are able to properly read the investment timing. An event in the news may affect the price of buying a stock but the result will only be temporary.

Conclusion

Buying stock is a matter of identifying the factors involved that can affect the price. Many times people make investment errors when they fail to realize that. Don’t worry about the puzzled looks you get for asking about the price. Do your technical analysis and learn to determine how much it costs when you are buying stock.