I understand but I don’t. When I “sell” stocks, who am I selling to exactly? The people who are buying in that exact moment? The exchange institution? Same when I’m “buying”.
In: Economics
I think, nowadays, it is sold or bought via a “dark pool” and does not go to an exchange. Google “stock market dark pools”.
The dark pool is essentially a middleman who might only hold the stock for a few seconds or longer.
Before dark pools, I think it was usually to another trader (who accepted the offer) or to something called a “market maker”. Again, these are middlemen who will hold it for a short while.
People buying at that moment. It’s very important, if you’re going to be playing the stock market, to choose stocks that have plenty of trades happening daily. If there’s nobody wanting to buy your stock when you’re ready to sell then you’re stuck with it until somebody wants it, usually at a lower cost than you wanted to sell for.
There is a finite number of stocks. You are buying them off whoever is selling them at that moment.
The more people that are attempting to buy a stock, the higher its price. If no one wants the stock its price falls.
There’s so much volume that there are always buyers and sellers at any one time.
Stock market is basically a continuous auction. You have people saying they will sell for $1 or more, and then people saying they will buy for $0.98 or less. When a sell order and a buy order can agree on a figure, that stock trades hands.
For example, when buying, you can do a market buy: your broker will find the cheapest (ish) sell price currently, and buy them on your behalf.
Or you could put in a buy order at a certain cost per share, and that will get filled when sell orders at that price come in.
Vice versa for the selling side.
Depending on how you placed your order, **you’re** the “other person” the buyer is buying from.
Your broker is “noting”, that you have bought a certain stock, when you buy it, thats all, same when you sell it. At the end of the day, there is balancing going on between brokers. The shares are somewhere else completely, so its just an accounting issue. A broker has actually bought much less shares, than his customers, because statistically, customer make bad decisions in general, so its better to take a risk and not buy all the shares, that customers bought. The risk managment is very important, but many brokers go out of bussiness, because they play risky games. This is actually a very complicated topic, because only recently settlement time changed to 1 day instead of 2. It actually doesnt really matter, because the broker doesnt buy shares on the open market. The market maker does(bigger financial institution supplying your broker with shares) market maker can extend settlement for much longer, years sometimes in hopes, that they will never have to buy it, since the customers will sell at a loss. This is not even 5% of an actual answer to your question. Its important to keep it complicated, so people like u and me will not bother trying to understanding how it works.
Basically, when you sell your stock, the institution that holds your stock on your behalf issues a sell-order for said stock and lists it at the price you sold onto the stock exchange; and the person you are “selling” to is going to be whomever’s buy-order you’ve matched with based on price.
The actual buying and selling is all facilitated by brokers and exchanges through order-matching systems and part of the whole hype of these exchanges and market-makers is they ensure liquidity and efficient trades without needing direct interactions. The magic of this is it makes things simple for casual traders and the economy as a whole because of the speed and ease it affords.
The following is meant to be an ELI5 – and so I’m aware that in actuality it is much more complex.
The price you see advertised is normally the most traded price i.e. the equilibrium whereby buyers and sellers agree is good value. As such, when you attempt to buy, the broker usually has this price as a default price – though you can choose to set a buy order at a different price.
So when you make the buy order, the chances that someone is trying to sell at the same time for the same price is extremely high – in which case the broker matches the buy and sell orders together. The buyers’ money goes to the seller.
Note that if trading volume for the stock as a whole is low, your buy order can just end up sitting there for hours, or even days until it is closed. This usually happens when trading stocks in very small companies.
If you’re selling stocks but no one is buying, your order will stay until someone wants to buy stocks for the set price.
So when you buy stocks you buy it from those who are selling at that set price.
Sometimes when people tries to abandon a crashing stock everyone is selling, but if no one is buying they cant sell it.
It’s the general public, but mainly folks who work on Wall Street.
Brokers technically do the buying and selling but they’re facilitating transactions for:
• Banks
• Hedge funds
• Insurance companies
• Pension funds, 401k managers, IRA managers and mutual funds
• Accredited investors
• Regular people or ‘retail investors’
• Foreign investors
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