Basic Qs About How Stock Trades Work

[Buzz$ 10]

Hello, I am just scratching the surface on trading. Must admit it all seems overwhelming but I'm going to see how far I can get into understanding the processes and procedures.

 

I've asked these questions of people who invest in stock markets but strangely, they usually answered with "I don't know." Maybe my questions don't even make sense.

 

You won't believe how basic these questions are but I've got to understand the bare minimum first. Prepare to chuckle.

 

These Qs pertain to stock markets.

 

1. I know that when a trader buys a stock, the price of the stock is driven up by that demand. Who or what actually increases the price of that stock? Does any purchase of a stock by any trader trigger the increase? What if multiple purchases are made before the increased price has been posted?

 

2. When I sell some stock that I bought earlier in the day, doesn't there have to be someone who is willing to buy that stock at the sell price I'm asking? What if nobody wants it at that price? If I wait until just before the close and nobody takes my offer can I get saddled with my position over night?

 

Okay, that's really about 10 questions-not two. Hope they make sense because I'm not even sure of my terminology.

 

Please use small words that a know-not like me can understand.

 

Thanks

[jpennybags 11]

Hey buzz...

 

In small words: "Just quit now".

 

You are asking questions that can easily be answered from a little reading. If you're not willing to do some work on your own, and want to be spoon fed... well, you'll never make it as a trader or investor.

 

DIY (discover it yourself). Your reading and further research will prompt the desire for more reading and research. It's all available for free, and for the most part... written in simple to understand language.

 

Hope this helps...

[DbPhoenix 42]

Hello, I am just scratching the surface on trading. Must admit it all seems overwhelming but I'm going to see how far I can get into understanding the processes and procedures.

 

I've asked these questions of people who invest in stock markets but strangely, they usually answered with "I don't know." Maybe my questions don't even make sense.

 

You won't believe how basic these questions are but I've got to understand the bare minimum first. Prepare to chuckle.

 

These Qs pertain to stock markets.

 

1. I know that when a trader buys a stock, the price of the stock is driven up by that demand. Who or what actually increases the price of that stock? Does any purchase of a stock by any trader trigger the increase? What if multiple purchases are made before the increased price has been posted?

 

2. When I sell some stock that I bought earlier in the day, doesn't there have to be someone who is willing to buy that stock at the sell price I'm asking? What if nobody wants it at that price? If I wait until just before the close and nobody takes my offer can I get saddled with my position over night?

 

Okay, that's really about 10 questions-not two. Hope they make sense because I'm not even sure of my terminology.

 

Please use small words that a know-not like me can understand.

 

Thanks

 

Everything you "know" in re your first question is incorrect. When a buyer and a seller complete a transaction, the price is what it is. Or was. The next transaction may take place at a higher price or a lower one. But price does not rise simply because two parties agreed upon a price. What changes the price is a change in perception of value. This changes thousands of times a day.

 

As for your second question, yes, somebody has to be willing to pay your asking price. If they aren't, you either hold it or lower your price. Many thousands of other traders are doing the same thing throughout the session, which is why price moves up and down.

 

For a primer on auction markets and how they work, see p. 15 and following in the pdf attached to the bottom of this post.

 

Doing a websearch will be of little help as most traders have this wrong.

 

Db