What is a point in the stock market? Best Example 2021

Many beginners remain confused when they hear that Dow Jones lost 100 points or 200 points as they don’t know what is a point in the stock market? So let’s find out the meaning of this point in this blog.

What is a point in the stock market?

When you read that a share has lost or gained X number of points, you’re hearing the same thing as when you hear that the stock has lost or gained X number of dollars; one point = one dollar.

Short-term results, including for the day or week, are usually described by using points to represent stock price gains or falls.

Due to the fact that points represent real dollar values, two shares can increase or fall by the same number of points yet have different percentage gains or losses.

These share points are not the same as bond or currency basis points. The relative movement of the index’s components determines the index’s points.

Example

Consider the following scenario: The share price of the imaginary business RRL Conglomerate would have dropped by 20.8 percent if it dropped 5 points from $24 to $19.

This is in stark contrast to a 5 Points loss seen by RJ whisky, which is currently selling at $205. If its stock declines $5.00 to $200, it will only have lost 2.5 percent of its value.

Difference between Points & Percentage

Keep in mind that points should not be confused with percentages or basis points (bps). When you hear that a stock has lost 10 points, the amount of the drop is determined by how high the share price is.

It’s vital to keep in mind that this point and dollar amount only apply to stocks. People frequently refer to indexes, bond prices, and currency exchange rates as being up or down X number of basis points, although these terms are not interchangeable.

One basis point equals 1/100th of a percent, thus if somebody says the dollar is up 50 basis points, they are referring to a 0.5 percent increase.

Originally published at https://profitmust.com on December 3, 2021.