How do quotations work ?
Hi my monkeys. For some reason i haven't been able to find a simple explanation online to this question. How do quotations work mechanically ? eg, for the price of a stock to be changed on my screen, what needs to happen ? does this mean that a few micro seconds ago, a transaction occurred at that price ? but this is easily abusable so there is more to it. would appreciate an explanation on how the quotations work.
Someone correct me if I am wrong.
There are bids and asks. The listed bid is the highest price someone is willing to pay for a share (I believe it usually lists how many shares the bid is for as well), and the ask is the lowest price a current shareholder is willing to sell a certain number of shares for. There will be no trade until these match or there is a market order, which the trade would then execute at the ask price.
I think it's easier to think of an illiquid stock. Some stocks don't trade in a given day, or they may trade 500 shares (as an example). The price of the stock won't move until a trade has executed (i.e., bid and ask prices have converged). If the bid and ask prices were the current price, the price won't move in this case, but if it was higher or lower than the current price, the stock price will move to the price of the last trade.
Does that make sense?
The price you see on your monitor is the price at which the last trade was done. However if you want to place a trade you would need to look at bid/ask price and those might differ from the last trade price by some margin. The more liquid is the stock the narrower is the margin.
in this case, what stops me from. 1.Finding a relatively illiquid stock 2.Screwing it's price by setting up false trades on small quantities with a few friends 3.buy a lot ... 4. Profit ?
This: https://www.sec.gov/answers/tmanipul.htm Then: short sellers If you would like to engage in to pump and dump activities, well good luck with than.
i'm just asking sir ! more seriously, i see now why there is so much fuss about well timed order executions. thanks for the quick explanations.
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