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Originally Posted by Nafiz Imtiaz Bin Hamid:
Taj vai,thanks for your day to day forecast regarding market trends.I'm quite a beginner in this arena.

Would you please let me know how to calculate the price of a particular share(the price it should be -not over or underpriced)?An example will make it easier to understand,I guess.

I guess this is quite vital for long time investment.Many of us have got stuck with bank shares.If we can find the real price of a bank share then at least some of us can think of averaging them to that price and keep them for around a year?
Thanks in advance.

Thanks brother.

It is difficult to determine the price of a stock. There is a common formula to calculate the perceived value  of a stock . This is Benjamin Graham's Formula. It says the buying price of a stock should not exceed 1.5 times of its NAV ( Net Asset Value) and 9 times EPS, For selling price it should be 2.5 times of its NAV and 15 times of its EPS. This formula is for theoritical application only, we can calculate the perceived value of a stock by using the formula. If you apply this law, you will find that most of the Banks shares are undervalued, and insurance, engineering, food sectors are overvalued. This formula will bound you to stuck up on the banks only. Say for an example, AB Bank. Its NAV is 298 and EPS 138, So according to Graham's formula, its buy price should be (298*1.5+138*9) i.e. 1689. But at present its price is 967. The formula says it has a good room to grow. But how much time it takes to go to the level? The formula does not tell it.

Actually we can not fix the price of a stock. It changes time to time. But yes, we have to calculate at what price we can buy a stock and at what price we should sell it.

Lets have an example, suppose this year we have grown 100 MT potato, our demand is 50 MT. How price will behave? As there is double supply than demand, price will fall nearly 50%.  Same in stock market too. If there is huge supply in the market, price will automatically go down, There are many indicators to find out this. First, the candlestick chart pattern. If you see there 10 % price fall with same volume than previous day, you can assume that there is no demand, price will fall further. Conversely, if you see 10% rise with near or same volume you can assume the demand created. Huge volume with no result indicates an indecision and in most cases price goes down.

It is not so difficult to find the buy and sell price from a chart. The simple way is Bollinger Bands. If price goes below the bollinger band it indicates buy, if it goes upper bollinger band it indicates sell. You can use Stochastic Charts also, If the stoch line touches the lower horizontal line, it indicates a buy and in case of upper horizontal line it indicates sell. You can use MACD to determine entry and exit points. buy signal generates when MACD Line ( Red line) crosses the signal line ( Blue line) and goes below, indicates a sell and buy in reverse order. There are also many other indicators such as RSI, CCI, MFI, ADX and lot more.

Technical analysis can help us to determine the price of a stock.

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Originally Posted by Taj U Ahmed:

Originally Posted by Nafiz Imtiaz Bin Hamid:
Taj vai,thanks for your day to day forecast regarding market trends.I'm quite a beginner in this arena.

Would you please let me know how to calculate the price of a particular share(the price it should be -not over or underpriced)?An example will make it easier to understand,I guess.

I guess this is quite vital for long time investment.Many of us have got stuck with bank shares.If we can find the real price of a bank share then at least some of us can think of averaging them to that price and keep them for around a year?
Thanks in advance.

Thanks brother.

It is difficult to determine the price of a stock. There is a common formula to calculate the perceived value  of a stock . This is Benjamin Graham's Formula. It says the buying price of a stock should not exceed 1.5 times of its NAV ( Net Asset Value) and 9 times EPS, For selling price it should be 2.5 times of its NAV and 15 times of its EPS. This formula is for theoritical application only, we can calculate the perceived value of a stock by using the formula. If you apply this law, you will find that most of the Banks shares are undervalued, and insurance, engineering, food sectors are overvalued. This formula will bound you to stuck up on the banks only. Say for an example, AB Bank. Its NAV is 298 and EPS 138, So according to Graham's formula, its buy price should be (298*1.5+138*9) i.e. 1689. But at present its price is 967. The formula says it has a good room to grow. But how much time it takes to go to the level? The formula does not tell it.

Actually we can not fix the price of a stock. It changes time to time. But yes, we have to calculate at what price we can buy a stock and at what price we should sell it.

Lets have an example, suppose this year we have grown 100 MT potato, our demand is 50 MT. How price will behave? As there is double supply than demand, price will fall nearly 50%.  Same in stock market too. If there is huge supply in the market, price will automatically go down, There are many indicators to find out this. First, the candlestick chart pattern. If you see there 10 % price fall with same volume than previous day, you can assume that there is no demand, price will fall further. Conversely, if you see 10% rise with near or same volume you can assume the demand created. Huge volume with no result indicates an indecision and in most cases price goes down.

It is not so difficult to find the buy and sell price from a chart. The simple way is Bollinger Bands. If price goes below the bollinger band it indicates buy, if it goes upper bollinger band it indicates sell. You can use Stochastic Charts also, If the stoch line touches the lower horizontal line, it indicates a buy and in case of upper horizontal line it indicates sell. You can use MACD to determine entry and exit points. buy signal generates when MACD Line ( Red line) crosses the signal line ( Blue line) and goes below, indicates a sell and buy in reverse order. There are also many other indicators such as RSI, CCI, MFI, ADX and lot more.

Technical analysis can help us to determine the price of a stock.

@taj bhai.....Excellent explanation...

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Originally Posted by Dse TiTan:

Originally Posted by Taj U Ahmed:

Originally Posted by Nafiz Imtiaz Bin Hamid:
Taj vai,thanks for  

@taj bhai.....Excellent explanation...

Thanks

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Originally Posted by Taj U Ahmed:

Originally Posted by Nafiz Imtiaz Bin Hamid:
Taj vai,thanks for your day to day forecast regarding market trends.I'm quite a beginner in this arena.

Would you please let me know how to calculate the price of a particular share(the price it should be -not over or underpriced)?An example will make it easier to understand,I guess.

I guess this is quite vital for long time investment.Many of us have got stuck with bank shares.If we can find the real price of a bank share then at least some of us can think of averaging them to that price and keep them for around a year?
Thanks in advance.

Thanks brother.

It is difficult to determine the price of a stock. There is a common formula to calculate the perceived value  of a stock . This is Benjamin Graham's Formula. It says the buying price of a stock should not exceed 1.5 times of its NAV ( Net Asset Value) and 9 times EPS, For selling price it should be 2.5 times of its NAV and 15 times of its EPS. This formula is for theoritical application only, we can calculate the perceived value of a stock by using the formula. If you apply this law, you will find that most of the Banks shares are undervalued, and insurance, engineering, food sectors are overvalued. This formula will bound you to stuck up on the banks only. Say for an example, AB Bank. Its NAV is 298 and EPS 138, So according to Graham's formula, its buy price should be (298*1.5+138*9) i.e. 1689. But at present its price is 967. The formula says it has a good room to grow. But how much time it takes to go to the level? The formula does not tell it.

Actually we can not fix the price of a stock. It changes time to time. But yes, we have to calculate at what price we can buy a stock and at what price we should sell it.

Lets have an example, suppose this year we have grown 100 MT potato, our demand is 50 MT. How price will behave? As there is double supply than demand, price will fall nearly 50%.  Same in stock market too. If there is huge supply in the market, price will automatically go down, There are many indicators to find out this. First, the candlestick chart pattern. If you see there 10 % price fall with same volume than previous day, you can assume that there is no demand, price will fall further. Conversely, if you see 10% rise with near or same volume you can assume the demand created. Huge volume with no result indicates an indecision and in most cases price goes down.

It is not so difficult to find the buy and sell price from a chart. The simple way is Bollinger Bands. If price goes below the bollinger band it indicates buy, if it goes upper bollinger band it indicates sell. You can use Stochastic Charts also, If the stoch line touches the lower horizontal line, it indicates a buy and in case of upper horizontal line it indicates sell. You can use MACD to determine entry and exit points. buy signal generates when MACD Line ( Red line) crosses the signal line ( Blue line) and goes below, indicates a sell and buy in reverse order. There are also many other indicators such as RSI, CCI, MFI, ADX and lot more.

Technical analysis can help us to determine the price of a stock.

Thanks a lot Taj vai.It was an awesome explanation But to get the best out of it,I've to learn TA :-S.