– Now I’ve done videos on how to make money from stocks, how a stock works, but never who exactly is determining the price of a stock, the value of the stock. Let’s take a look at that. Now before I get started I want to just give credit where credit’s due. I did not come up with this idea. Thanks to you as viewers, somebody left a question, and as obvious as it is to me, somebody that’s been in the market a long time, when I put myself in someone else’s shoes, oh, you know what? That makes good sense.
[cryptolock][/cryptolock]So let’s first just get to the comment that was made, and then we’re gonna tackle this right off the get go. Who determines the value of a stock? So yeah, how is this price being determined. I promise I’ll try to boil it down to make it halfway entertaining. But at the end of the day, it’s all about this right here. And if you’ve ever taken an economics class, then you’ve heard of supply vs demand. And that is how a stock is being priced, how the value’s being determined. But let’s not look at is as supply and demand, let’s look at it in a much more practical way. And we’re gonna call supply, give. Right, if you want to give something to somebody, another way you could say that is, here, I’m gonna to supply you with this, meaning I want to give it to you. So supply associate with give. And then demand, is a want. I demand what? I demand you give this to me, right.
You want something, that’s what a demand is. Like when in a hostage situation, the person taking the hostage is making demands, meaning they want something in regards to the hostage. So forget supply and demand, I mean these are just boring economic terms. Let’s just look at things in terms of give and want. And my idea here, and my goal is, to hopefully insult your intelligence and be like, hey, thanks Captain Obvious, that’s, that’s yeah, thanks a lot. So let’s just quickly hop into this. Hopefully this video shouldn’t be that long. But if a lot of people want something, so, a lot. What is that gonna do to a price of something? If a lot of people want it. Like just, I want it, I want it. And there’s all sorts of people that want it. That’s gonna cause what? Prices to go down if a lot of people want to buy something? Or prices to go up? It’s gonna cause prices to go up, right, ’cause a lot of people want it.
On the flip side what happens if there are a lot of people that want to give something? I don’t want that, I don’t want that, here, let me give it to you, let me give it to you. Everybody wants to give you something. Or in other words, everybody just wants to sell something. Get rid of it. Give, give, give. What is that gonna do to the price of something if everybody just wants to give it, sell it, get rid of it? Well if a lot of people want to get rid of something, give it, well prices are gonna go down, right.
And let’s apply this to the world of stock market. If a company, if you watched my past videos, you’ve heard me talk about pizza as an example. So let’s say a company specializes in pepperoni pizza. And I’ve used this before. And a study comes out that says pepperoni is the worst thing ever invented. If you eat it, for every bit of pepperoni, you’re gonna lose three years off your life.
What do you think is gonna happen to the price of a company that specializes in pepperoni pizza? Are people gonna wanna want those shares? Or are people gonna wanna start to give them, sell them, sell them. Well of course, who is gonna want to hold on to a share, who’s gonna wanna hang onto something that has been proven now to be super unhealthy for people? So, of course, people are gonna want to give it, get rid of it, or in trading lingo, sell it.
And when a lot of people want to sell, that’s, prices are going down. On the flip side, if something comes out, pepperoni pizza adds three years to your life for every piece that you eat, what are people gonna want to do as far as companies that specialize in pepperoni? They’re gonna want. Hey, I want a part of that, I want those shares, I want to get involved.
Want, want, want, want, want. When a lot of people want to get involved, what is that gonna do to those, the prices? A ton of people want it, those prices are going up. So what determines the value of a stock? Well just how many people want to give it, or how many people want it. And that’s it. The more people that want, the higher prices are gonna go. The more people that give, the lower prices are gonna go. That’s what supply and demand is and it’s a constant battle. Prices are always changing and the different prices are gonna determine, and they’re gonna fluctuate all the time.
You can watch the video that I did, entitled The Ultimate Game, and that kind of maps out the whole question, which revolves around supply and demand, and why you gotta be pretty witty, and why you gotta be pretty good at determining things because you’re always trying to figure out when is the want gonna overwhelm the give, when is the give gonna overwhelm the want. And that’s what trading is. We’ll put a link to that video down below. But that’s what’s gonna determine the value of a stock. The market itself, how many people want the stock, or how we people want to give it, how many people want to sell it. Or in other words, going back to supply to somebody else. I just don’t want that stock anymore. So hoping that answers your question and hopefully that just gives you a good idea of what exactly, and how exactly, a value of a stock is being determined. (whooshing).
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