4.1.
\nDetermination of the Share Price of the Listed Company<\/p>\n4.1.1. The Theoretical Price of Stock of Listed Company<\/span><\/b>
\n
\n<\/span><\/div>\n\n
The theoretical price of a listed company’s stock is defined in 2.4. The
\ninstantaneous price of the theoretical price of listed company\u2019s stock due to
\nfluctuation factors can be calculated, but it is unrealistic, and is not
\nnecessary.<\/span><\/div>\n\n
\n4.1.2. The Transaction Price of Stock of
\nListed Company<\/b>
\n
\n<\/span><\/div>\n\n
Because there are many uncertain factors in the stock trading, the
\ntransaction price of the stock of listed company is inconsistent with the
\ntheoretical price. These uncertainty factors are mainly due to the randomness
\nof the transaction, speculativeness, temporalness, competitiveness, and so on.
\nTrader’s psychological factor is also an uncertain factor.<\/span><\/div>\n\n
\n4.2. Determination of Stock Price Scope<\/b><\/span><\/div>\n\n
\n<\/span><\/b>At a certain moment, the theoretical price of a listed
\ncompany should be the only, but the transaction price may not be consistent
\nwith its theoretical price. A listed company’s stock price should be in a
\nscope, at least in theory; this scope is the maximum and minimum value of the
\ntransaction stock price of a listed company, that is, sentinel value<\/b>. As the value of a listed company is dynamically
\nchanged in the market competition, therefore, at different moments, a listed
\ncompany’s sentinel value is also dynamically changed.<\/span><\/div>\n\n<\/div>\n
\n<\/div>\n
\n<\/div>\n
\n
4.2.1. The Maximum Value
\nof the Transaction Stock Price<\/span><\/b><\/span><\/div>\n\n
\nThe maximum value of the transaction stock price of the listed<\/span><\/b> company can be defined as the theoretical price of the listed company at a
\ncertain valuation moment. In other words, the maximum transaction stock price
\nof a listed company is its theoretical price.<\/span><\/div>\n\n
\n4.2.2. The Minimum Value of the
\nTransaction Stock Price<\/b><\/span><\/div>\n\n
\nThe minimum value of the transaction stock price of the listed company<\/span><\/b> can be defined as the value of the fact part valuation in the theoretical
\nprice of the listed company at a certain moment. That is to say that a listed
\ncompany’s minimum transaction price can not be less than the value of the fact
\npart valuation.<\/span><\/div>\n\n
\n4.2.3. Out of Price Scope Management<\/b><\/span><\/div>\n\n
\n<\/span><\/b>In real transactions, a listed company’s transaction
\nstock price may break above mentioned scope of the maximum and minimum value
\nscope, this is the out of the price scope issue, the stock trading over the maximum value of transaction stock price is
\nthe manifestation of the stock market bubble, the stock trading breaking the
\nminimum value of the transaction stock price is the manifestation of the loss
\nof entrepreneur\u2019s core asset<\/b>. So it is necessary to manage the out of the
\nprice scope issue. Here two levels of management can be conducted, the first
\nlevel is transaction management within the scope of the sentinel values, which
\nis the normal transaction management; one is the transaction management outside
\nthe scope of the sentinel values. Transaction outside the sentinel values is
\ngenerally not allowed, the specific approaches can be further explored by the
\nfinancial regulatory authorities. Such as voluntary, undisclosed, restricted
\ntransactions, and so on.<\/span><\/div>\n\n
\n4.3. Summary<\/b><\/span><\/div>\n\n
\n<\/span><\/b>Sentry theory provides a theoretical foundation for out
\nof price scope management, eliminating the stock market bubbles and preventing
\nfinancial risks. Sentry theory minimizes the interference of random factors on
\nstock trading to the max degree and increases the certainty of valuation.<\/span><\/div>\n\n
\n5. Similar Concepts<\/b><\/span><\/div>\n\n
\n<\/span><\/b>In the theories of security market, there are several
\ntheories similar to sentry theory, here the author simply introduce them in
\norder to show the differences:<\/span><\/div>\n\n
\n5.1. Box Theory<\/b><\/span><\/div>\n\n
\n<\/span><\/b>Box theory is a theory proposed by American <\/span>Nicolas Darvas<\/span> according to his security market practice. “<\/span>Nicolas Darvas<\/span> thinks stock prices generally fluctuate within a certain range, creating a
\nbox of stock prices for fluctuation. When the stock price slips down to the
\nbottom of the box, it will be supported by buying; when the stock price rises
\nto the top of the box, it will be under pressure to selling. Once the stock
\nprice effectively break the top or bottom of the original box, the stock price
\nwill enter a new stock box to run, the top or bottom of the original stock will
\nbecome the important support level and pressure level. Therefore, as long as
\nthe stock price rose and rushed to another box imagined by your heart, you
\nshould buy; in the other hand, you should sell.” [8]<\/sup><\/span><\/div>\n\n<\/div>\n
\n
5.2. Price Change Limitation<\/span><\/b><\/div>\n\n
\n<\/span><\/b>Price <\/b>change
\nlimitation is the transaction restriction measure implemented when the
\ntransaction price of a listed company in the stock market changed out of a
\ncertain range in a day. This kind practice of stock market management is very
\ncommon in China
\nand in many other countries around the world. [9]<\/sup><\/span><\/div>\n\n
\n5.3. Fusing Mechanism<\/b><\/span><\/div>\n\n
\n<\/span><\/b>“Fusing refers to stopping the transaction in a full
\nday or within a specified period of time when the market price changes touch a
\nspecified range. That is to say, the exchange market does not accept orders
\nwhich is over the rising price limit and below the falling price limit, and
\nfusing is just the temporary fluctuation restriction before this maximum
\nfluctuation limitation, fusing has a certain activation condition.[10]<\/sup>
\nThis is the current fusing mechanism.<\/span><\/div>\n\n
\n5.4. Differences<\/b><\/span><\/div>\n\n
\n<\/span><\/b>Box theory is a kind empirical theory proposed based on
\nthe stock market trading activities; it is a technical observation on the
\noutside manifestation of the stock price. The similarity with the sentry theory
\nI proposed is inevitable, and this kind similarity just proves the correctness
\nof my sentry theory.<\/span><\/div>\n\n
\nChange limitation and fusing mechanism all are security market regulatory
\nmechanisms, such regulatory mechanisms are implemented for the protection of
\ninvestors\u2019 interests and stable market, is purely implemented for human\u2019s
\nneeds. Such regulatory measures lack the support of theoretical foundation, and the sentry theory precisely provides
\nthe necessary theoretical foundation for them<\/b>. Fusing mechanism is almost
\nexactly the same with the out of scope price management I my proposed.<\/span><\/div>\n\n
\n6. Significances<\/b><\/span><\/div>\n\n
\n<\/span><\/b>Sentry theory has laid a theoretical foundation for the
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