understanding price change

[stock_trader]

Hi everybody, new here

I am in the market for a while now, mainly traded forex and comodities. now i want to start trading stocks. it just occur to me that im not sure i know exactly how stock price changes.
from what i know - the price of a stock is the last price that a bid and ask agreed of. so, if for example the price now is 50, and assume that i want to buy in price 100 - obviousley there is someone want to sell in this price - so the price now jump to 100?? so basically i can create myself a crazy shooting star with such a small trade (assume im buying one stock or something... dont know what is the minimum)??
sounds weird to me.
where am i wrong here?

Thanks.

 

[malaguti]

Hi everybody, new here

I am in the market for a while now, mainly traded forex and comodities. now i want to start trading stocks. it just occur to me that im not sure i know exactly how stock price changes.
from what i know - the price of a stock is the last price that a bid and ask agreed of. so, if for example the price now is 50, and assume that i want to buy in price 100 - obviousley there is someone want to sell in this price - so the price now jump to 100?? so basically i can create myself a crazy shooting star with such a small trade (assume im buying one stock or something... dont know what is the minimum)??
sounds weird to me.
where am i wrong here?

Thanks.

you may well want to buy at 100, but how about other people?
they may want to buy lower when it gets to 51, and there may be lots of people wanting to sell their stocks at 51 so the price may never actually reach 100 due to the demand and supply at these levels.
so price changes based on supply and demand and the amount (or volume) of that demand and supply at any price point and point in time.
hope that helps

 

[stock_trader]

you may well want to buy at 100, but how about other people?
they may want to buy lower when it gets to 51, and there may be lots of people wanting to sell their stocks at 51 so the price may never actually reach 100 due to the demand and supply at these levels.
so price changes based on supply and demand and the amount (or volume) of that demand and supply at any price point and point in time.
hope that helps

Thanks malaguti.
So, the question now is how the bid and ask commands are ordered? i assumed asks ordered in ascending queue, when the lowest is first to be executed, and bids in descending queue when highest is first, but in this case my bid of 100 would be executed first, which doesnt happen. but i though that this order would make the most sense i guess - the fact that someone willing to sell in 51 of course means he will prefer to sell at 100 if such bid available, so why not to let him? just to control price change?

Thanks.

 

[Solas0077]

Order is best bid and best ask.

http://www.investopedia.com/terms/n/nbbo.asp

 

[malaguti]

Thanks malaguti.
So, the question now is how the bid and ask commands are ordered? i assumed asks ordered in ascending queue, when the lowest is first to be executed, and bids in descending queue when highest is first, but in this case my bid of 100 would be executed first, which doesnt happen. but i though that this order would make the most sense i guess - the fact that someone willing to sell in 51 of course means he will prefer to sell at 100 if such bid available, so why not to let him? just to control price change?

Thanks.

And this is where volume comes in
lets assume someone wanted to buy 100 shares at 51 and somebody wants to sell 200 shares at 51, what's going to happen?
not all shares can be sold, so 100 gets sold at 51 what about the rest, they get sold at slightly lower prices so now price goes down to say 49 where there are some more buyers waiting. but they may just have 150 shares to prices move up higher, lower, higher. all depending on how many shares are being sold at each individual price point. It may never reach your 100. do you see? if there are more people offloading. if there is more supply, prices go down..if there are just two market participants, yes you may be lucky you could sell at 100. but its unrealistic

 

[stock_trader]

And this is where volume comes in
lets assume someone wanted to buy 100 shares at 51 and somebody wants to sell 200 shares at 51, what's going to happen?
not all shares can be sold, so 100 gets sold at 51 what about the rest, they get sold at slightly lower prices so now price goes down to say 49 where there are some more buyers waiting. but they may just have 150 shares to prices move up higher, lower, higher. all depending on how many shares are being sold at each individual price point. It may never reach your 100. do you see? if there are more people offloading. if there is more supply, prices go down..if there are just two market participants, yes you may be lucky you could sell at 100. but its unrealistic

thanks.
sorry but i still dont see how exactly it answers my question.
how volumes responsible for the bids / asks order? ok, so assume the price now is 50, and i send bid of price 100, for, say, 1 bilion shares (lots of shares..) than it matters something? the price anyway wont get to my bid price, as long as there are normal, bids and asks - i mean not stupid crazy bids for high prices - so the price will keep going up and down in this area of 50. so my bid volume doesnt really matter, my bid is placed somewhere in the end of the queue, right?

i hope im clear about it. i just want to know the technical details here. what is the right order of bids and asks?

thanks again.

 

[malaguti]

thanks.
sorry but i still dont see how exactly it answers my question.
how volumes responsible for the bids / asks order? ok, so assume the price now is 50, and i send bid of price 100, for, say, 1 bilion shares (lots of shares..) than it matters something? the price anyway wont get to my bid price, as long as there are normal, bids and asks - i mean not stupid crazy bids for high prices - so the price will keep going up and down in this area of 50. so my bid volume doesnt really matter, my bid is placed somewhere in the end of the queue, right?

i hope im clear about it. i just want to know the technical details here. what is the right order of bids and asks?

thanks again.

OK, I'll try and put it another way..two ways

the first way is like this
1000 shares to buy at 50 gets filled with the first order to sell 100 shares at 51, the next order to sell 100 shares at 52, the next order to sell at 55 (there were no orders between 52 and 55...ie it gaps) and so on until that 1000 is filled.

the other way is that there is a queue, but there is no order to this queue. people can jump in at any time, ahead of you depending on how many shares they want to buy and sell at that given price.
you have shares waiting to buy or sell at 100 but price is 50

whilst your waiting for price to reach 100 an order comes in to sell shares at 50, more people come in to sell, and more because the price is 50 not 100. that drives prices down. they are all jumping the queue because you wont budge at 100

you have to wait, and wait and wait until more buyers come in at lower prices..they are also jumping the queue because price is at say 48 now.
now the unexpected happens and there is an order to buy that 1 billion shares at 48. they can't all be filled at 48, so price moves up and all the people wanting to sell jump in this ever moving queue, they have 1000 shares to sell at 51, theres not enough to fill the 1billion, so more shares are filled higher and higher.

now all the people who wanted to sell or buy at 40 are at the end of the queue as prices are now moving higher, so they too have to wait if they don't want to budge.
eventually, maybe that 1billion shares will take the price to 100. there you get filled.
this is how price changes and this is how a shooting star as you put it doesn't happen just because you have an order at 100. I hope thats clearer. if not, i'm afraid i don't think i can explain it another way.

if that doesn't quite explain it, then I'm afraid im out of ways to explain how price moves which was your original question and hope you do find the answer