Price discovery has to be transparent in order to work correctly for both buyers and sellers. Consider the traditional auction process. If a bidder did not know what prices were being offered by other buyers, it would be impossible to establish a fair price for any participant.<\/p>" } } , { "@type": "Question", "name": "Which Comes First: Price Discovery or Valuation?", "acceptedAnswer": { "@type": "Answer", "text": "
Valuation comes first. A buyer or seller determines an acceptable price, or price range, for an asset based on many factors. In fundamental stock analysis, for example, this includes looking at a company's earnings history, its competition, its management, and the product plans it has in the pipeline. That gives the buyer a way to project a stock's potential growth and set a fair price or price range for it. The buyer only then is ready to enter the interactive process of price discovery.<\/p>" } } , { "@type": "Question", "name": "How Do I Use Price Discovery When I Use an Online Broker?", "acceptedAnswer": { "@type": "Answer", "text": "
Whether you're aware of it or not, you're using price discovery every time you buy or sell a stock or other asset. The current quote is either acceptable or unacceptable to you as a buyer or seller. If it's unacceptable, you wait until it changes.<\/p>" } } ] } ] } ]