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Lesson 14. How to Check Your Investments > Reading the Stock Tables - Pg. 89

How to Check Your Investments Plain English 89 The daily high-low entries list the highest and lowest points at which the stock was trading over the course of the day. Used together, you can use these figures to better understand the volatility of the stock. Remember that this is different from the high-low listing discussed earlier which shows the highest and lowest price of the stock over the last year. During the stock trading day, investors will buy some stocks and sell others. As a very general rule, when more shares of the stock are being sold than purchased, the price of the stock will drop because of the laws of supply and demand. These same rules would cause the price of the stock to rise should more shares be purchased than sold. Interestingly enough, these peaks and valleys of the stock price create a self-fulfilling prophesy. As the stock crests at new heights and drops to new lows, these new levels will, in turn, cause investors to buy and sell the stock even more. Although it is not possible to chart the entire trading day of each stock in these tables, the tables do provide the highest and lowest points the stock reached on its journey to the end of the day. Sub- tracting the lowest price of the day from the highest provides a figure known as the spread. The spread accurately measures the volatility of the price of the stock during the trading day. Like the volume of stock traded, the spread is completely dependent on the stock's perceived value in the market, rather than the value attributed to the stock by its issuing company. Perceived values will be what drives sales and purchases of the stock. Caution Since the perception of a stock's value is heavily influenced by events and announcements in the market, the spread is more of an indicator of the market's reaction to these events, rather than the condition of the company. The perceived value can be thought of as the ultimate in self-fulfilling prophecies. A company that maintains a low perceived value could, in theory, eventually lose all its investors and go out of