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Explaining the stock market from the buyer & seller side, using shoes as an example:
Seller side -
You got some Js. You heard somewhere that they’re worth $200 so you list em online for $200. Somebody messages you saying they’ll give you $250 for em if you take the listing down ASAP
You got some Js. You heard somewhere that they’re worth $200 so you list em online for $200. Somebody messages you saying they’ll give you $250 for em if you take the listing down ASAP
You go to take it down and somebody else messages you they’ll give you $300. Now you wondering how much they’re actually worth 
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤔" title="Thinking face" aria-label="Emoji: Thinking face"> so you leave it up & raise the price to $300.
Somebody messages you $325 if you take it down. Somebody else says $350. Then $400, $425, $450, $475..
Somebody messages you $325 if you take it down. Somebody else says $350. Then $400, $425, $450, $475..
You say “shiiiiit I’m listing these bitches for $750”
Crickets. Nobody messages you. So you drop the price to $700. Still nothing.
“Maybe $650, yeah they’ll sell for $650.” But still nothing so you drop it down to $600. And.... nothing.
Crickets. Nobody messages you. So you drop the price to $700. Still nothing.
“Maybe $650, yeah they’ll sell for $650.” But still nothing so you drop it down to $600. And.... nothing.
“Ok $550 then, fuck y’all” you say as you edit the listing again.
You get some views but still no offers, so you lower it again to $500. You get some messages and two people say they’ll come pick em up. But the buyers don’t show up.
You get some views but still no offers, so you lower it again to $500. You get some messages and two people say they’ll come pick em up. But the buyers don’t show up.
Then the person who offered you $475 messages you again asking for feedback so you finally sell them for $475.
The market specified the price by saying what price they would and wouldn’t buy at. That forced you to lower the price to be able to sell em
The market specified the price by saying what price they would and wouldn’t buy at. That forced you to lower the price to be able to sell em
This is exactly how stocks work. For every stock being traded, there is an order book that shows all the buy orders at all the diff prices and all the sell orders at all the diff prices. The price of a stock is reflective of what people are willing to sell and buy it at
Microsoft is currently at $153.40 per share but there are buy orders on the books as low as $38 and sell orders as high as $268
This means there are people trying to buy Microsoft at $38 per share and people trying to sell it at $268 per share.
The price is actually $153 so nobody that wants to sell, will sell for $38 and lose money & nobody will buy for $268 when they can buy at $153.
The price is actually $153 so nobody that wants to sell, will sell for $38 and lose money & nobody will buy for $268 when they can buy at $153.
The current price of a stock is simply the market value. It’s the mesh point where the average buyer and seller are comfortable making the transaction.
If a company is doing well, people are more likely to pay a premium for their stock, and vice versa. Which leads us to...
If a company is doing well, people are more likely to pay a premium for their stock, and vice versa. Which leads us to...
Buyer side:
You were the seller. I’ll play the buyer...
Yo dumbass was selling some Js for only $200 that can resell for $500. So me being the hustler I am, I see an opportunity. I’m hoping you sell em to me for $250 so I can double my $ asap
You were the seller. I’ll play the buyer...
Yo dumbass was selling some Js for only $200 that can resell for $500. So me being the hustler I am, I see an opportunity. I’m hoping you sell em to me for $250 so I can double my $ asap
You ignored my message and I saw you increase the price a couple times so I knew you got hip. You still had em listed for $400 at one point which was still a discount so I placed another offer.
You ignored me again and increased the price again to $425. I’m over here like “this dude here, playin hardball now. Ok!”
So I send my final offer at $450. I could still sell em for $500 and get about 11% return, the lowest return I’m willing to take
So I send my final offer at $450. I could still sell em for $500 and get about 11% return, the lowest return I’m willing to take
Yo bitch ass ignores my offer again and I see em sell to somebody else for $475 https://abs.twimg.com/emoji/v2/... draggable="false" alt="😢" title="Crying face" aria-label="Emoji: Crying face">https://abs.twimg.com/emoji/v2/... draggable="false" alt="😫" title="Tired face" aria-label="Emoji: Tired face">https://abs.twimg.com/emoji/v2/... draggable="false" alt="😤" title="Face with look of triumph" aria-label="Emoji: Face with look of triumph">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤬" title="Face with symbols over mouth" aria-label="Emoji: Face with symbols over mouth"> All I did was increase the amount you got by showing you my interest and showing you that you were undervaluing the shoes
Which is how stocks work. You buy the stock of a company for one reason, you think the value will go up. If you see Microsoft selling for $153.40 but you think the actual value is around $160, then you’re willing to buy at $153.40. You’re even willing to buy up to $155
By you telling the market you’re willing to buy at $155, the sellers of Microsoft stock will test it and see if you (and others) will buy at $155 despite the market price at $153.40.
If you’re willing to buy at $155 then the market value just increased to $155.
If you’re willing to buy at $155 then the market value just increased to $155.
And vice versa. If you like Microsoft but don’t think it’s technically valued at $153.40 right now, you can try to buy it at $152. If you successfully buy it at $152, then the market is telling you that the stock may be over valued
So there you have it. That’s the mechanics behind the constant changes of stock prices. Markets are just people buying & selling. The more you can simplify the stock market, the more comfortable you can be with investing.
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