Knowing this will help you to be calm and restrained when picking stocks. If you still plan to buy stocks cheaply, then you can choose to buy Chinese cabbage, buy at a low price and sell it at a high price, and you can eat it yourself if you can't sell it. But when you buy stocks, you buy penny stocks, what if they can't go up? Do you keep it in your hands? Although there is no shelf life for stocks, stocks can be delisted.Before speculating in stocks, you must first understand the factors that determine the price of stocks, generally speaking, there are two main factors that determine stock prices.

1. The actual value of the listed company represented by the stock

Everyone is issuing shares, and the reason why some stocks are expensive and some are low is because the intrinsic value of the listed companies behind each stock varies greatly. This intrinsic value determinant includes many factors, such as enterprise size, profitability, development prospects, etc.

2. Real-time stock prices are the result of market games

In the stock market, there must be a buyer, and when the seller is willing to sell the stock at a lower price, the stock price falls, and when the buyer is willing to buy at a higher price, the stock price rises. Through the gambling behavior of buyers and sellers, the stock price fluctuates.

Under normal circumstances, stock prices tend to fluctuate around the intrinsic value of a listed company. However, if influenced by market sentiment, or if speculators buy or sell in large quantities, the stock price will deviate significantly from its intrinsic value.

From the above analysis, it can be simply classified as two types of stock prices that are relatively low.

1. The intrinsic value of shares issued by listed companies is relatively low.

Stocks with low intrinsic value can be divided into two situations, one is that the listed company issues too many shares of shares, resulting in a low stock price; The second is the poor profitability and poor development prospects of listed companies, and the intrinsic value is relatively low.

2. The outcome of the market game.

The buyer is unwilling to spend a higher price to buy, that is, these investments believe that investing in this stock can not obtain a relatively high profit, which is essentially that the buyer is not optimistic about the stock. Especially at the end of the bear market, the influence of market factors will also lead to the lower stock prices of some high-quality listed companies.

There is no doubt that if you buy shares of a listed company at a relatively low valuation, you can get relatively good returns or even double your income when you encounter a better market; but the fact that most stocks hover at low levels for a long time indicates that the market does not expect high prices for stocks unless there is substantial good news for the industry or the company. Another scenario is that there are now more speculators in the A-share market. In the case of some low-priced small-cap stocks, they are likely to induce a faster rise in the short term, and when small retail investors follow through with their purchases, they will sell quickly, resulting in retail investors taking over and having to be more vigilant in the process of speculation. This is why many speculators emphasise value investing rather than speculation, which can be profitable but not in the long term.

（Writer：Tick）