Volume Affects Stock Price? by duck_fanatic |  |
STOCK EXCHANGE - There are many misconceptions that people believe about the
stock market.
Some are commonly being asked and answered correctly everyday on the stock
message board, yet many people still believe them. Some misconceptions
many people believe, and if you ask if it is true, you'll get many answers.
The point of this article is to clearly refute possibly the most common misconception,
that volume affects stock price.
The concept that volume affects stock changes is very simple. It's fairly
easy to believe. After all, in the real world, that's exactly how it works.
However, in Neopia, it has nothing to do with it.
How do I know this? First of all, stocks that are under 15 cannot be bought.
Under the volume changes price theory; this stock would never go up. However,
as we all know stocks under 15 NP per share do indeed go up. One person I who
believed the volume theory was quick to point out that stocks under 15 could
be affected by the rises and falls of other companies in the same family. Fair
enough, I say, but what about companies like AAVL? It's one of a kind, no other
members in its family, nothing to make it rise if it's under 15, yet it sill
goes up.
Secondly, it would simply be too easy. If volume affected stock price, then
people could merely look at the stock list and find the stock with the highest
volume of the day, buy it, and make loads of NP. The operators of Neopets need
to make the game challenging, so everybody wouldn't just make all the NP they
need and get completely bored of Neopets, stop playing it, reduce the number
of hits on the site, and reduce the amount of money each advertisement on the
site would fetch. Come now, do you think the operators of the stock market are
that dumb?
Finally, I give the microphone to the voice of experience. So many times I
have seen the 'hot stock of the day', with a volume of well over a million turn
around and drop a couple points, dismaying investors. So many times I have seen
a stock nobody was buying skyrocket, leaving potential investors wondering what
might have been.
In conclusion, as much as we would like it to be, how many people buy a stock
does not affect its price changes. There is a completely different debate on
what really does, but there is another article on this Web site which can give
you one Neopian's explanation, giving you another chance to have common beliefs
about the Neopian Stock Market refuted. Have fun investing! |
