Please pardon my greenpea question, but...... Im familiar with how to read a chart....looking for points of resistance in a stocks movement etc., and i know how and when to place a buy or sell bid, and i understand that if i sell i need to set a "limit" price for when i want it to execute. But....... can someone explain in simple terms, how is does it happen that those "resistance" points develop so evenly? Example - lets say a stock has been at $5.00 (upside) a week ago and is now going down and is at $200, but starting to go up again. Then all of a sudden we see it right at $5.0000 again!! The a couple hours later it does down and right back to $5.0000 even!! How does that happen, when the broker (Etrade) sets the bid and ask figures and theres a small gap there, (price-wise) that allows the trade price to fluctuate??? HELP!!!
The broker doesn't "set the bid and ask figures", the market does. The broker (Etrade) just reflects them back to you, their client. @Robert Morse Would be a big help here, because he's a broker-dealer type deal IIRC.
Buying drives prices up, selling drives them down. Some say that lack of buying also drives prices down until the buyers emerge. With small capitalisation stocks, very small buying/selling volumes can cause major price changes. Stocks always have two prices, beware which one you are quoted (or quoting). The difference between the two can be significant in % terms, especially with small caps. The price you would buy the share is the Ask price, the price you would get when you sell it is the Bid price. The difference is the spread. Most charts show only the Bid price (or some show the Mid-price, which is the average between Bid and Ask). The spread can get wider around market open, close, when the markets are very volatile due to some event like Fed interest rate announcements or and when news specific to the company or its sector is emerging. Spread changes don't usually show up on a chart. Support and resistance are levels at which price makes repeated reversals. Some traders anticipate that having reversed at a given price two or more times already, price is likely to reverse at or near the same price again. Nothing necessarily to do with value of the share or company, just price on the chart.
Thank you for the bump, but I did not understand the questions. If Rodbuilder believes price fluctuation is influenced by his broker, that is obviously not true.
How is it that someone can regulate where the chart will be after he buys? How is it possible for someone to cause a stock to go to, say, $3.0000, 4 times in one month? I dont get it!