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I understand and at the same time there's one little thing I'm missing which has always mystified me about stocks: Who sets "the price"? I understand that if

I understand and at the same time there's one little thing I'm missing which has always mystified me about stocks: Who sets "the price"? I understand that if a large amount of shares appear on the market with no demand, the entity selling them will lower the price in an effort to sell them. But how does that factor into "the price" that the stock is worth across the market from any/all sellers? How is that calculated? Is it just whatever the stock last sold for?

brwnll 11y ago
Yes, the stock price represents the last transaction. If you are looking at a stock trading platform, you will usually also see "Current Ask" and "Current Bid" representing standing sell and buy prices (respectfully) for the stock.
- aerovistae 11y ago
  Re: the last transaction, what if I sell someone a couple shares of Microsoft stock for $1? That obviously wouldn't affect the stock. Is there some mathematical expression of amount of stock that has to be sold to impact the price? Or is it a question of the sale being done by certain authorized entities? BTW, if you don't see "reply" under this comment like I don't for yours, you can go to my profile page and "comments" and then you will see the "reply" link.
  - lambertsimnel 11y ago
    I think if you're a member of the public trading on an exchange, all you can do is ask an authorised entity to accept the "bid" or "ask" price (mentioned by brwnll above), which are set by other authorised entities. Maybe you can trade at another price by not using the exchange, in which case the market price would not reflect that trade, but I imagine that it would typically be difficult to find someone to trade with unless (maybe even if) you set a generous price. I don't know, but maybe donating securities to charity and accepting a takeover bid could be considered examples of off-exchange trading. If an authorised entity wanted to set an unusual "bid" or "ask" price, I think that would either trigger a trade (if it made the "bid" higher than the "ask") or (otherwise, assuming other authorised entities don't follow suit) merely signal that particular entity's unwillingness to trade that security at that the prevailing market price and have no effect on the market price. I don't know whether this differs from exchange to exchange.
deleted 11y ago
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Chickenosaurus 11y ago
To put it simply, the price is chosen to allow the biggest number of transactions or, alternatively, the biggest turnover at any given moment. Example: Price Buy Sell 124 € 130 pcs 50 pcs 125 € 120 pcs 90 pcs 126 € 70 pcs 90 pcs 127 € 30 pcs 100 pcs In this case, the price would be 125 €. 90 transactions can happen at this price; there is no other price which allows more transactions to happen because of the supply and demand constraints.

brwnll 11y ago

Yes, the stock price represents the last transaction. If you are looking at a stock trading platform, you will usually also see "Current Ask" and "Current Bid" representing standing sell and buy prices (respectfully) for the stock.

aerovistae 11y ago
Re: the last transaction, what if I sell someone a couple shares of Microsoft stock for $1? That obviously wouldn't affect the stock. Is there some mathematical expression of amount of stock that has to be sold to impact the price? Or is it a question of the sale being done by certain authorized entities? BTW, if you don't see "reply" under this comment like I don't for yours, you can go to my profile page and "comments" and then you will see the "reply" link.
- lambertsimnel 11y ago
  I think if you're a member of the public trading on an exchange, all you can do is ask an authorised entity to accept the "bid" or "ask" price (mentioned by brwnll above), which are set by other authorised entities. Maybe you can trade at another price by not using the exchange, in which case the market price would not reflect that trade, but I imagine that it would typically be difficult to find someone to trade with unless (maybe even if) you set a generous price. I don't know, but maybe donating securities to charity and accepting a takeover bid could be considered examples of off-exchange trading. If an authorised entity wanted to set an unusual "bid" or "ask" price, I think that would either trigger a trade (if it made the "bid" higher than the "ask") or (otherwise, assuming other authorised entities don't follow suit) merely signal that particular entity's unwillingness to trade that security at that the prevailing market price and have no effect on the market price. I don't know whether this differs from exchange to exchange.

deleted 11y ago

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Chickenosaurus 11y ago

To put it simply, the price is chosen to allow the biggest number of transactions or, alternatively, the biggest turnover at any given moment. Example: Price Buy Sell 124 € 130 pcs 50 pcs 125 € 120 pcs 90 pcs 126 € 70 pcs 90 pcs 127 € 30 pcs 100 pcs In this case, the price would be 125 €. 90 transactions can happen at this price; there is no other price which allows more transactions to happen because of the supply and demand constraints.