E-Investing India - Online Community for Investors and Traders  

Go Back   E-Investing India - Online Community for Investors and Traders > Stock Markets > Stock Market Psychology
Read All Rules Contact Site Administrator

Stock Market Psychology Stock Market Psychology

Reply
 
Thread Tools Display Modes
  #1  
Old 13th December 2012, 01:09 PM
Member
 
Join Date: May 2012
Posts: 89
Rep Power: 159
DineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond repute
Default Psychological Price Boundaries



Tracking a few stocks, it seems to me that traders appear to be wary of numeric boundaries. For example, if the open price of a stock is 17.15, it might go down quickly to 17.05 and 17.00. However, crossing 17.00 down to 16.95 will take a long time to happen. I've seen this happening only with gradual falls. I've not noticed it happening with rises.

Is this a known effect? Or am I reading too much into this?
Reply With Quote
  #2  
Old 13th December 2012, 03:46 PM
Administrator
 
Join Date: Sep 2006
Posts: 11,222
Rep Power: 7563
Alchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond repute
Default

Quote:
Originally Posted by DineshV View Post
Is this a known effect? Or am I reading too much into this?
It happens in both directions.

Many market participants place orders at non-decimal prices and therefore orders built up over time at these levels.

e.g. If an ordinary investor wants to sell his long-term holding in HUL, he will call this broker and tell him to keep a sell order at a price like 522 or 523 or 525. He won't give a sell order at price with decimal like 522.55 or 523.45.

There are 20 times more prices with decimals than prices without decimals.

e.g.

Between 180 and 181, there are 20 prices with decimals - 180.05, 180.10, 180.15 and so on.

If half of the participants in the stock market give random orders at decimal prices and other half give random orders at non-decimal prices, the average number of orders at non-decimal prices will be 20 times the average number of orders at decimal prices.
Reply With Quote
  #3  
Old 13th December 2012, 07:24 PM
Member
 
Join Date: May 2012
Posts: 89
Rep Power: 159
DineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond repute
Default

That makes sense. Cheers Sachin.
Reply With Quote
  #4  
Old 14th December 2012, 09:03 AM
Member
 
Join Date: Oct 2010
Posts: 202
Rep Power: 324
vaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond reputevaduvur has a reputation beyond repute
Default

Quote:
Originally Posted by Alchemist View Post
There are 20 times more prices with decimals than prices without decimals.
Why not a hundred? x.01 to x.99?
Reply With Quote
  #5  
Old 14th December 2012, 09:15 AM
Member
 
Join Date: May 2012
Posts: 89
Rep Power: 159
DineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond reputeDineshV has a reputation beyond repute
Default

Perhaps because the NSE tick size is 0.05 (so, 19 times). It's true that on the BSE it's 0.01 (99 times).
Reply With Quote
  #6  
Old 14th December 2012, 09:44 AM
Administrator
 
Join Date: Sep 2006
Posts: 11,222
Rep Power: 7563
Alchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond reputeAlchemist has a reputation beyond repute
Default

Quote:
Originally Posted by DineshV View Post
Perhaps because the NSE tick size is 0.05 (so, 19 times). It's true that on the BSE it's 0.01 (99 times).
You are right. If the tick size was 0.01 for all stocks, there would be 99 possible prices between two non-decimal prices.

On BSE, only stocks below Rs 15 have a tick size of 1 paise.

Quote:
However, in order to increase the liquidity and enable the market participants to put orders at finer rates, BSE has reduced the tick size from 5 paise to 1 paise in case of units of mutual funds, securities traded in "F" group and equity shares having closing price up to Rs. 15 on the last trading day of the calendar month. Accordingly, the tick size in various scrips quoting up to Rs.15 is revised to 1 paise on the first trading day of month. The tick size so revised on the first trading day of month remains unchanged during the month even if the price of scrips undergoes a change.
Equity Trading | Indian Equity Market | BSE
Reply With Quote
Reply


Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
ONGC FPO Price? jay_trading Initial Public Offerings - IPO Market 2 27th June 2011 07:02 PM
Cut Off vs Maximum Price shrkon Initial Public Offerings - IPO Market 2 23rd October 2010 08:58 AM
Target Price of a Stock? Biker Fundamental Analysis 0 16th October 2009 03:28 AM
Limit Price and Trigger Price naidukrishna Markets & Indices 3 16th July 2009 09:36 PM
IPO Listing Price PPP Initial Public Offerings - IPO Market 5 11th February 2008 08:05 AM


All times are GMT +5.5. The time now is 11:48 AM.


Powered by vBulletin® Version 3.6.8
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
SEO by vBSEO 3.6.0
Ad Management plugin by RedTyger