I have been in the stock market for years, and there’s one thing I constantly see: people confuse a stock’s price with its true value. Let me be direct: the market value of a stock is simply what the market is willing to pay at this moment. Nothing more, nothing less.

Think of it this way. When you see a company trading at 50 euros per share, that price didn’t fall from the sky. It’s the result of buyers and sellers meeting at an equilibrium point. Someone wants to sell at that price, someone wants to buy at that price, and boom: there’s your market value. If I try to sell at 100 euros when the market is at 50, I’ll probably be stuck with my shares. And if I try to buy at 20, no one will sell them to me. The market is brutal in that regard.

Now, here’s where it gets interesting. You can set the price at which you want to buy or sell. You’re free to do so. But freedom doesn’t mean you’ll find a counterparty. That’s the game. The market value of a stock exists precisely because people are constantly buying and selling, creating that consensus of prices.

I’ve seen too many investors fall into the liquidity trap. A stock rises 300% in a week and everyone wants in. But when you look at the volume, it’s ridiculous. Four guys buying and selling. That’s dangerous. If you need to exit quickly and there are no buyers, you get trapped. That’s why I always say: only work with assets that have respectable volume. The market value is only reliable when there’s real liquidity.

There’s something many don’t understand: there’s the primary market, where companies issue new shares, and the secondary market, where we trade those securities among investors. The market value you see on your broker is from the secondary market. That’s where the real action happens.

Another thing: market capitalization is directly linked to the market value of a stock. If you know the price per share and multiply it by the total number of shares, you get the market cap. It’s pure math. But here’s the problem: that market cap doesn’t always reflect the company’s true value. Especially during bubbles.

I’ve seen speculative bubbles that kept me awake at night. Terra in Spain was a classic example: it went from 12 euros to nearly 160 in months, just because the internet was crazy about it. Not because of its fundamentals. Gowex was worse: a complete scam that stayed listed while the numbers were fake. The market believed in the market value of a stock that didn’t represent anything real.

So, is the market value efficient? Honestly, no. It can be completely disconnected from a company’s real worth. Book value (net accounting value) isn’t perfect either, but at least it gives you another perspective. I always recommend looking at both. If the market value is well below the book value, there might be an opportunity. If it’s way above, be careful: it could be a bubble.

What I’ve learned is that the market is efficient in the long run, but in the short term, it’s pure emotionalism. The market value of a stock reflects what people believe today, not necessarily what it’s worth tomorrow. That’s why some investors look for differences between the market price and the intrinsic value. It’s the game of value investing.

My advice: understand the market value, respect it, but don’t worship it. It’s a tool, not the absolute truth. And always check liquidity before entering. I’ve seen too many people trapped in illiquid positions to ignore that.