eli5 How is the ticker price of a stock decided when there are multiple trades of a stock happening at the same time?
In: Other
Let’s say the current price of a stock is 19.85
The only people willing to sell puts sell stock for 20 and it goes in the system
The only buyers puts buy stock for 19.50 and it goes in the system
The only way it moves up or down is…
Until a buyer decides “hey I think this stock will be worth 20 or more in the future I’ll buy it from you” is when the average price changes higher between the last bought price and current sell price depending on how many shares left are being traded for the current price.
For example, 1000 shares being sold at 20. But someone only buys 500. So the average price would still remain the same until someone buys the remaining 500 to push the prices higher.
But let’s say someone buys the full 1000. Now the next sellers will sell their shares of 10000 at let’s say, 20.25. The current price will now change higher because the sell and buy price have now shifted to something like
“sell price 20.25”
“buy price 20.00”
“Average price = 20.15”
or something like that.
Also works the same in reverse.
Most popular stocks change price fast because most of the market (70%) is from bots trading back and forth. Although some unpopular stocks may not move as fast or at all.
Options trading can also affect the market price too because if a whale (rich person) buys a bullish position or bearish position in the millions, many people and bots will see that trade and will change their trading strategy based on new information. It’s pretty crazy how deep it can go.
Theres multiple buying requests (bid) and selling requests (ask) happening. If you are trying to buy a stock, your trading program will look for a seller thats offering as close to that price as possible and vice versa
Are there multiple trades happening at the same time? Usually it’s just a lot of trades in a short period of time but they can still determine which one was last.
Latest Answers