PSX Complete Course | Price Movement, Price Types, Limit, Market and Stop Loss Order | Class 3

Summary of Financial Strategies, Market Analyses, and Business Trends from the Video:

1. Overview of Pakistan Stock Exchange (PSX) and Company Types:

• PSX trades shares of public listed companies only (over 500 companies).
• Private limited companies operate but their shares are not traded publicly.
• The key difference between private and public companies is ownership: public companies offer shares to the general public.

2. Primary Market vs. Secondary Market:

• Primary Market: Where companies issue shares for the first time through an Initial Public Offering (IPO). Investors buy shares directly from the company, no broker involvement is required, but a CDC (Central Depository Company) account is necessary.
• Secondary Market: Where shares are traded among investors on the PSX through brokers after IPO listing. This market involves continuous trading of shares.

3. Price Movement and Types of Prices:

• Share prices fluctuate based on demand and supply.
• Three key price types in PSX:
  • Bid Price: The price buyers are willing to pay.
  • Ask Price: The price sellers are asking for.
  • Last Traded Price (LTP): The price at which the last transaction occurred.
• Price movements can be volatile, influenced by market conditions similar to other commodities (e.g., tomato prices affected by seasonality).

4. Order Types Explained:

• Limit Order:
  • Buyer or seller sets a specific price limit.
  • The order executes only if the market price meets the limit.
  • Example: Seller wants at least Rs. 45,000 for a laptop; waits until a buyer offers that price.
• Market Order:
  • Buyer or seller agrees to execute the order at the best available market price immediately.
  • No price limit is set.
  • Example: Seller accepts the highest current bid price in the market.
• Stop Loss Order:
  • Designed to limit potential losses.
  • Automatically sells shares when the price falls to a predetermined level.
  • Two types:
    • Normal Stop Loss Order: When price hits the stop loss, the order becomes a market order and sells at the best available price.
    • Stop Loss Limit Order: When the stop price is triggered, the order becomes a Limit Order with a set minimum selling price, possibly not executing if the price falls below the limit.

5. Practical Examples and Market Dynamics:

• Price determination is based on supply and demand.
• Order execution depends on market participants’ bids and asks.
• Risk management is crucial; stop loss orders help protect investors from significant losses.

6. Additional Notes:

• Trading requires a broker account in the secondary market.
• CDC account is necessary for holding shares.
• The session encourages feedback and suggests future topics like mutual funds, commodities, and forex based on audience interest.

---

Methodology / Step-by-Step Guides Shared:

• Understanding IPO and Market Types:
  • Private company decides to list shares.
  • Offers shares directly to the public (primary market) without PSX involvement.
  • After IPO, shares get listed on PSX (secondary market).
  • Investors trade shares via brokers in the secondary market.
• Placing Limit Orders:
  • Decide minimum (for selling) or maximum (for buying) acceptable price.
  • Place order with this price limit.
  • Order executes only if market price meets the limit.
• Placing Market Orders:
  • Place order without price limit.
  • Order executes immediately at best available price.
• Using Stop Loss Orders:
  • Set a stop price to limit loss.
  • When price hits stop price, shares sell automatically.
  • Choose between normal stop loss (market order on trigger) or stop loss limit (Limit Order on trigger).

---

Presenters / Sources:

• The session is conducted by an instructor (name not provided) offering a free training program on Pakistan Stock Exchange trading fundamentals.
• Examples and explanations are based on PSX data and practical scenarios.