An Analysis of Stock Price with the Remaining Volume

The most important factor that determines the stock price is the demand and the supply for a stock. Even if the value of a stock is very low and its price is overestimated, the price would still go up as long as there are more people willing to buy the stock. Even if the technical analysis gives a sign to sell a stock, the price may still go up as long as more people do not think the price will go down. This paper looks into how the demand and the supply for a stock would change, and from what we can define its changes. It is not the firm’s intrinsic value or the economic variable which directly drives the changes in the stock price in the future but it is the stock market trader (one that can affect the stock market) that takes action according to their expectations, whose behavior directly affects the stock price equilibrium. Traders’ expectations on the future stock price can be represented by the remaining volume of the asking price and the bid price. It does not matter whether the expectation is right or wrong. The set of traders’ expectation builds up the price in the future like ‘self-fulfilling prophecy’.