Question for experienced traders?

Discussion in 'Technical Analysis' started by pasha, Nov 11, 2005.

  1. pasha

    pasha Active Member

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    I have noticed many times that a stock will close at a certain price and the next day will open at a different price. Some of these overnight price moves are quite large.
    Just like day moves are capped to 20%, is there a limit to these overnight changes?
    What exactly causes such large changes?
    In thinly traded stocks this type of move happens all the time but in high volume stocks it is not expected.
     
  2. gandharvashu

    gandharvashu Member

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    Yes for every stock there is a price band specified by exchange like 5%, 10%, 15%, 20%, etc. You can check BSE for price information where they have listed these bands. Stocks cannot exceed their band on that day, may be it is up or downward price. Generally these thin volume stocks are part of T, TS, or Z category and these categories have 5% bands. Only trade in thin volume stocks with great conviction, otherwise you can get trapped that is stocks opening in down freeze.
     
  3. kaka

    kaka Member

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    one can manipulate prices in a thin volume stocks easily by buying or selling in first few minutes of trade

    but then as others start to trade the prices gets stabilised with time to were it shud be
     
  4. pasha

    pasha Active Member

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    >>one can manipulate prices in a thin volume stocks easily by buying or selling in first few minutes of trade
    but then as others start to trade the prices gets stabilised with time to were it shud be
    Yes, so then the opening price will be recorded. Even then, the difference in price between close and next day open is substantial.
    Do these close to open changes have any limit%? If buying a stock today at 100, tommorrow morning it could open at 50. Possible?
    Just theoretical, but still needs to be answered.
     
  5. kaka

    kaka Member

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    yes if the stock has circuit limit

    let us say that u bought a stock at 100 which has circuit limit of 10 % so on that particular day the stock can move in a range of 90 to 110

    let us say that it closes at 105 on that day

    so for the next day it cannot open less than 94.5 or more than 115.5 because of its 10% circuit limit

    yes if the stock has no circuit limits
    which fortunately most stocks have
     
    Last edited: Nov 12, 2005
  6. pasha

    pasha Active Member

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    Thanks kaka, understood.
     

  7. sudoku1

    sudoku1 Well-Known Member

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    OFSS.............shooting thru d roof !!
     

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