Title: Stock Market Data Calculations - Percent Vs. Points
When analyzing a stocks value, or more to the point change in price (to most investors, the most important number), there are two simple factors which come into consideration: the change in Points and the change in Percentage. Most reviews, ratings, recommendations, i.e. musings on the stock market, that I have see are singularly concerned with Percent, an easy to comprehend and very useful factor. However, viewing the market in this manner is intrinsically limiting in the stocks which can be considered. Including a measurement of change by Points provides a full, more diverse, view of the market, often overlooked by many investors.
For example: If you buy a stock at $50 and sell at $55 you have made a Percent gain of 10% and a Point gain of $5/share. The important concept/difference in using these two metrics is that one (Percent) is based on the dollars you have put in and the other (Points) is related to the number of shares. Fairly obvious, but the interesting devil is in the details.
If I am buying stocks in the conventional method of buying low and selling high as shown in the example the return is obvious. However, what happens if I were trying to take advantage of the change in price in the other direction ($55 to $50 or selling short)e Once again, based on Points, I made $5/share, BUT, by Percent I only made 9.1%.
Also, if I change my example a little and say the stock only increases in value to $51 when I sell I have only made 2% on my investment. For someone who only invested $4,000 to start the return is a disappointing $80 ($60 after you pay for the trade). This will keep me in latt
