Scroll Top


    Price Discovery

    Meaning of Price Discovery

    Price discovery is a process which determines market prices, mostly through interactions between buyers and sellers. Price discovery is a method for determining the spot price of a commodity through interactions between sellers and buyers – often referred to as a price discovery process or price discovery mechanism.

    Typically, the balance between sellers and buyers is an essential predictor of a market's demand and supply; and demand and supply are major drivers of price changes. This balance is best seen when presenting support and resistance rates on a price line.

    Resistance rates represent the point at which demand for a commodity has begun to fall, which is dragging down the price. Help means the point at which demand for a commodity starts to increase, which pushes the price up – both presuming that supply remains consistent.

    How Does Price Discovery Function?

    Price discovery allows sellers and buyers to set the market price of a tradable asset. That is because the price discovery mechanisms set out what sellers intend to acknowledge, and what buyers intend to pay. Therefore, price discovery is related to finding the equilibrium price, which facilitates the maximum liquidity for that asset.

    Which Factors Determine Price Discovery?

    There are various factors which decide the levels of price discovery. Following are a few factors:

    • Supply and demand
    • Attitudes to risk
    • Volatility
    • Available information
    • Market mechanisms

    Why Is Price Discovery Important in Trading?

    Price discovery matters in finance, as the driving factors behind the financial markets, are supply and demand. In markets that are continuously in a state of bullish and bearish flux, it is crucial to continually reassess whether a product, stock, forex pair, or index is currently under/overbought and whether its market price is fair to buyers and sellers alike.


    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use


    ISO 27001

    Data Center


    SSL Certified Site

    128-bit encryption