I’ve been thinking lately about something that most investors don’t really understand: what that number actually is that you see on your screen when you look at a stock. That price we all check every day. Well, that’s the market value of a stock—and believe me, understanding it well can save you a lot of headaches.

Look, it all started when we stopped bartering. Imagine a town where people traded chickens for carrots and fabrics for tools. Total chaos. Then money arrived and simplified everything. But here’s the interesting part: once everything has a price in currency, that price isn’t fixed. It depends on how many people want to buy versus how many want to sell. That’s exactly what determines the market value of a stock on the exchange.

People sometimes ask me: Can I sell my shares at the price I want? Technically yes, but here’s the trick. If a stock is trading at 16 euros and you try to sell it at 34, no one will buy it. It’s like going to a traditional market and trying to sell an apple at a gold price. You need to find someone willing to pay what you’re asking. That’s why the market exists: so buyers and sellers can meet at a price both sides accept.

Now, there’s something crucial that many people forget: liquidity. If a stock has low trading volume, even if it rises exponentially, it can be a trap. I’ve seen cases where values jump to the headlines for spectacular gains, but when you dig deeper, hardly any trades have actually taken place. That means the move isn’t real—it’s just that very few people bought or sold. When you try to get out of that position, you end up trapped.

This is why the market value of a stock should be calculated with respectable volume behind it. Only then does the price reflect something close to reality. The formula is simple: you take the total number of shares of a company and multiply it by the current price. That gives you market capitalization. But honestly, you don’t even need to do the math; brokers show it to you automatically.

Here’s where many people go wrong: confusing market value with the actual value of a company. These are different things. Market value is what the market says it’s worth today. But that’s not always correct. I remember the case of Terra in Spain, a stock that started at 11.81 euros and, in less than a year, reached 157.60 euros. It was pure internet frenzy, not real results. Then Telefónica absorbed it and it disappeared. Or Gowex, which claimed to be a global Wi-Fi giant, but turned out to be a massive scam. Its CEO lied, the numbers were fake, and when Gotham Research uncovered it, everything collapsed.

This is what happens when market value gets disconnected from fundamentals. Bubbles come from this. Everyone sees the price rising, so they buy without asking why it’s rising in the first place. It’s mass psychology disguised as investing.

The reality is that, although imperfect, market value is your best day-to-day reference. It’s not perfect, and book value isn’t either. But you need something to guide you. My advice after years of observing this: look for stocks with real volume, understand the difference between the bid (sell) and ask (buy) prices, and above all, don’t confuse a rising market value with a good investment. Time and numbers always end up telling the truth.