Stock Markets Exposed

How stocks are auctioned? many people quote their prices, who price is market price?

I wanna simulate the auction process of stock in stock market.How is the current price of stock is determined when there are too many sellers and buyers . Please explain the auction process in detail with example Thanks in advance

Public Comments

1. There are never too many buyers and sellers. The price quoted on the stock exchange is the last trading price. Buyers make bids, sellers make offers. When the two are the same value, a trade (buy/sell) occurs and a quote is generated on the exchange. Simulate the market? Good luck. There is a ebb and flow of sentiment based on news, announcements, accidents, sentiments, deaths, etc. Markets work fine when sentiment varies . . . some think buy, some think sell. However, markets break down when sentiments don't vary. When "everybody" knows they have to BUY, then we have a blow off top and ensuing market crash. When "everybody" knows that they have to SELL, then a market bottom soon forms and new bull market begins.
2. A seller sells 100 shares of Coca-Cola at $100.00 and at exactly the same time a buyer buys 100 shares of Coca-Cola at $100.00 In this case the computer matches both orders and the orders are deleted from the book a nanosecond later. A seller sells 1000 shares of Coca-Cola at $100.00 and at exactly the same time 9 buyers buy 100 shares of Coca-Cola at $100.00 In this case the computer matches ten orders and the orders are deleted from the book a nanosecond later. There is now one open order to buy 100 shares of Coca-Cola at $100.00 With enough open orders to buy the stock will go up. A seller with 10,000 shares of Coca-Cola sees the open order for 100 shares at $100.00 and he decides to sell the shares for $110.00 He is now selling 10,000 shares of Coca-Cola for $110.00 The buyer sees this and he may offer a little more than $100.00 or buy at $110.00 If he wants to buy the shares right now then he will offer $110.00 for 100 shares and the order will be matched and the order will change for 9900 shares. If he wants to buy the shares but he is not willing to pay $110.00 then he can place an order to buy at $105.00 The seller may accept the offer and sell for $105.00 or he may change his price from $110.00 to $109.00 Eventually the buyer will buy their 100 shares and everybody will be happy. As you can imagine. If there are two sellers with 10,000 shares each then things get tough for them because the buyer will always buy from the seller with the lowest price. Things change a lot when there are two sellers. One may offer the stock for $99.00 and the other seller will be forced to change the price to $98.00 and so on. On the other hand, if there are two buyers and only one seller then you can charge $200.00 for each share and they don't have a choice but to buy from you. It's very simple. If you need a more detailed answer just drop me a line.