What actually controls stock prices?

nopeda

Junior member
21 0
Do the companies control the prices at which their stocks sell, raising the price as more stocks are sold? Or does the price automatically rise as more are bought, and then go down when they are sold? Or doesn't the number of sales have anything to do with it? Or...???

Also, can you always buy and sell stock when you want to? I had been of the opinion that you could just buy and sell whenever you want, or maybe whenever the market is open. But someone mentioned something about one of the dangers of penny stocks being that you can't always get rid of them when you want to. So can you not always buy and sell when you want? And if not, what places the restrictions?

Thank you for any help understanding these things!
David
 

zaysev36

Well-known member
421 15
Do the companies control the prices at which their stocks sell, raising the price as more stocks are sold? Or does the price automatically rise as more are bought, and then go down when they are sold? Or doesn't the number of sales have anything to do with it? Or...???

Also, can you always buy and sell stock when you want to? I had been of the opinion that you could just buy and sell whenever you want, or maybe whenever the market is open. But someone mentioned something about one of the dangers of penny stocks being that you can't always get rid of them when you want to. So can you not always buy and sell when you want? And if not, what places the restrictions?

Thank you for any help understanding these things!
David
Not that it's hard to imagine such ignorance, but how did you stumble at T2W?:) To your questions:
1) Current stock price is the price at which last deal with this stock has been made. In other words, it's the price set by seller, that was accepted by a buyer.
2) It depends on the instrument you use for trading. For example, you may use put or call options, where its execute date is approved in advance.
 

timsk

Legendary member
7,136 1,911
Hi David,
Do the companies control the prices at which their stocks sell. . .
This is a quaint notion, and one that every company would love, as their share price would only ever sky rocket and never fall! The answer to your question is supply and demand, as played out through trades executed on the exchange(s) that the company is listed on. That said, companies will constantly try and influence the price, and big firms employ PR teams to big the company up to woo investors and thus shore up the price.

. . .Also, can you always buy and sell stock when you want to?
Yes and no. Again, it's a case of supply and demand. If you're trying to sell penny shares and there's no one who wants to buy them, you could find yourself stuck with them. That isn't going to happen with a major FTSE100 or S&P500 company but, even then, you might not get your trade filled at the exact price you ideally want. And if you're trying to short sell a stock, you'll be borrowing shares from your broker. If they haven't got any on their shelves - and can't get any anytime soon - then you won't be able to trade them. However, that doesn't happen very often and very rarely with the major, highly liquid companies.
Tim.
 

hhiusa

Senior member
2,687 139
Hi David,

This is a quaint notion, and one that every company would love, as their share price would only ever sky rocket and never fall! The answer to your question is supply and demand, as played out through trades executed on the exchange(s) that the company is listed on. That said, companies will constantly try and influence the price, and big firms employ PR teams to big the company up to woo investors and thus shore up the price.


Yes and no. Again, it's a case of supply and demand. If you're trying to sell penny shares and there's no one who wants to buy them, you could find yourself stuck with them. That isn't going to happen with a major FTSE100 or S&P500 company but, even then, you might not get your trade filled at the exact price you ideally want. And if you're trying to short sell a stock, you'll be borrowing shares from your broker. If they haven't got any on their shelves - and can't get any anytime soon - then you won't be able to trade them. However, that doesn't happen very often and very rarely with the major, highly liquid companies.
Tim.
The part in blue is not entirely true. When most people complain that they are not getting the price that they want, it is because they do not have any real time market data. Real time market data costs money and you have to subscribe to it from each exchange. If you are trading penny stocks, you need OTC market data. If you are trading AAPL, then you need NASDAQ market data. If you are trading Burberry, then you need LSE market data. If you do not have market data, then the price you are looking is not what the price really is. The discrepancy between your executed price and the price you see, is most likely due to trading CFDs and your lack of market data subscriptions.

Notice the IBM market depth window. In the ask column, it says ask = 125.95, size = 14 and cum size = 14. If click on "125.95", I am guaranteed that price and can buy up to 1,400 shares at that time. 14 * 100 = 1,400. If that price is showing, it means that somebody is willing to sell to me at that price. If I click on it, it instantaneously transmits at that price. The only reason I would not get that price, is if somebody beats me to it. In that event, the price will have changed before I will have clicked on it.



You do not only have to borrow from you broker. You can borrow from other people if you have direct market access.
 

timsk

Legendary member
7,136 1,911
The part in blue is not entirely true.

David,
hhiusa's post above is both comprehensive and right on the money. I have no issue with it at all. I said what I said because, rightly or wrongly, I assumed (always a dangerous thing to do, lol) that, like most novice retail traders, you probably won't be trading actual shares via a level II screen using a direct market access broker. If I'm right about that, then for a whole bunch of reasons over and above those outlined by hhiusa, you will often find that the price your trade is executed at differs to the price flashing across your screen at the exact instant you click the buy or sell button.
Tim.
 

dbphoenix

Legendary member
6,952 1,245
David,
hhiusa's post above is both comprehensive and right on the money. I have no issue with it at all. I said what I said because, rightly or wrongly, I assumed (always a dangerous thing to do, lol) that, like most novice retail traders, you probably won't be trading actual shares via a level II screen using a direct market access broker. If I'm right about that, then for a whole bunch of reasons over and above those outlined by hhiusa, you will often find that the price your trade is executed at differs to the price flashing across your screen at the exact instant you click the buy or sell button.
Tim.
All of which depends on the type of order. If one uses a stoplimit entry, he either gets exactly what he wants or he doesn't get the trade at all. The odds of getting the trade will depend on liquidity. I always use stoplimit entries with the NQ and have very rarely failed to get the price I want. If I were trading penny stocks, I'd be spending most of my time waiting.

BTW, I don't use LII.

Db
 
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hhiusa

Senior member
2,687 139
All of which depends on the type of order. If one uses a stoplimit entry, he either gets exactly what he wants or he doesn't get the trade at all. The odds of getting the trade will depend on liquidity. I always use stoplimit entries with the NQ and have very rarely failed to get the price I want. If I were trading penny stocks, I'd be spending most of my time waiting.

BTW, I don't use LII.

Db
The fact that you mentioned that it depends upon order types shows that you have limited knowledge around this subject. If I click on that price in a deep book window for any instrument, be it equity, option or future and liquid or illiquid, the price displayed is the price you get. When I click on that price, it is because someone is willing to sell at that price I thought many shares no matter how illiquid the stock is, even if they are selling mean the only one hundred shares transmitted for the entire day. It is a de facto market order. I do need a stop limit order because I can see exactly what the price is and if I want it at that price.

If I am away and unable to watch it constantly, I use a MIT (market if touched) order. Again, if you place a market order and don't get the price that you want it is because of two reasons, mainly, that you are trading CFDs and/or that you don't have market data subscriptions.

Liquidity should not be an issue. It does decrease the likelihood that you will be matched with the buyer or seller. However, if there is one then you will be able to get that price. The only downside I see with low liquidity is usually that the spread is wider.
 

dbphoenix

Legendary member
6,952 1,245
The fact that you mentioned that it depends upon order types shows that you have limited knowledge around this subject. If I click on that price in a deep book window for any instrument, be it equity, option or future and liquid or illiquid, the price displayed is the price you get.
The fact that you would make such a statement shows that you nothing at all about the subject.

But good luck with your trading, nonetheless.

Db
 
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TexasRangersFan

Active member
185 47
Do the companies control the prices at which their stocks sell, raising the price as more stocks are sold? Or does the price automatically rise as more are bought, and then go down when they are sold? Or doesn't the number of sales have anything to do with it? Or...???

Also, can you always buy and sell stock when you want to? I had been of the opinion that you could just buy and sell whenever you want, or maybe whenever the market is open. But someone mentioned something about one of the dangers of penny stocks being that you can't always get rid of them when you want to. So can you not always buy and sell when you want? And if not, what places the restrictions?

Thank you for any help understanding these things!
David
Hi David,

This is a quaint notion, and one that every company would love, as their share price would only ever sky rocket and never fall! The answer to your question is supply and demand, as played out through trades executed on the exchange(s) that the company is listed on. That said, companies will constantly try and influence the price, and big firms employ PR teams to big the company up to woo investors and thus shore up the price.


Yes and no. Again, it's a case of supply and demand. If you're trying to sell penny shares and there's no one who wants to buy them, you could find yourself stuck with them. That isn't going to happen with a major FTSE100 or S&P500 company but, even then, you might not get your trade filled at the exact price you ideally want. And if you're trying to short sell a stock, you'll be borrowing shares from your broker. If they haven't got any on their shelves - and can't get any anytime soon - then you won't be able to trade them. However, that doesn't happen very often and very rarely with the major, highly liquid companies.
Tim.

The price of a stock is determined by supply and demand. And the sale is often executed within tenths of a thousandths of a second after the order is placed.

You can see how much a stock is traded during the day if you look at the stock volume. They often list the current volume, today's volume (at the close of the day ) and yesterday's volume. It is often the same (basically) but an increase in volume often follows good news or bad. Or it could be a slow day due to a holiday etc...

There are many placed that illustrate trading volume but this is one resource....


This is the link for Tesla. Yesterday they had a trading volume of 5.7M shares.

http://finance.yahoo.com/q?s=tsla&ql=1


At 2pm NYC time, they have 5.6 M shares traded and there are 2 more hours remaining in the trading day.

And they are down 6.50. They are down because they recently sold 300k preordered Tesla 3 cars that will not begin delivery prior to the end of 2017. Analysts are saying that they can't build 300k cars of one model and that many will cancel their orders and that other manufacturers will have new electric cars out there by 2017 that will take their market share.

They also remarked that Tesla's PE ratio is like 225 which is extraordinarily high and it must come down to be in line with other companies that actually produce a profit, unlike Tesla. It also has a market cap of 34BN which is higher than many other companies with a stable, profitable income statement.

----

Penny stocks don't have the capital requirements to be listed on major exchanges so they are listed in the 'Pink Sheets' or the BB online.

They are thinly traded, a lot of investors don't pursue them. It is not unusual to look at a penny stock and see that it has not traded in 1 hour or that no shares were even traded in a single day. If the market turns south or you lose interest it is not unrealistic to think that you may go to sell your stock and no one will be around to buy it. Unlike MSFT, AAPL or Tsla.

Example:

Liquidmetal: LQMT .13

Average volume 77k for an entire day. 1.3M already today and there are 2 hours left to trade.

Look at the spikes in the share price. Every other stock in the SP 500 will have subtle movements, these are sharp and sudden.

Beta of 1.43 which is high. Beta measures volatility. The higher it is, the more volatile. 1 is average. Below one is conservative and safe .......like Exxon ,90; or MSFT 1.06.


https://finance.yahoo.com/q?s=tsla&ql=1
 

hhiusa

Senior member
2,687 139
The fact that you would make such a statement shows that you nothing at all about the subject.

But good luck with your trading, nonetheless.

Db
Really? Do tell! What is incorrect! :confused:

Do you have real time market data subscriptions? If so, which? You do not need to use stop limit orders, if you have market depth data.

It is interesting that you should tell me that I am wrong, seeing as how nobody has seen any proof of trading activity whatsoever from you.

Good luck selling the SLA to newbies!
 

dbphoenix

Legendary member
6,952 1,245
Really? Do tell! What is incorrect! :confused:
I believe there are a couple of vendors that drop in to T2W occasionally. Perhaps you could persuade one of them to explain market orders, limit orders, etc to you for a reasonable fee.

Db
 

hhiusa

Senior member
2,687 139
I believe there are a couple of vendors that drop in to T2W occasionally. Perhaps you could persuade one of them to explain market orders, limit orders, etc to you for a reasonable fee.

Db
Translation - you can't.

That was not what I was after Mr. SLAyer. You know it and everyone here knows it. That is typical for a vendor to say for a reasonable fee.

You have not said what was wrong with it, which is very telling. :cheesy:
 

dbphoenix

Legendary member
6,952 1,245
You have not said what was wrong with it, which is very telling. :cheesy:
That you don't know what's wrong with it is also very telling.

Try stockcharts.com. I'm sure you can find an explanation of order types there.

Db
 

hhiusa

Senior member
2,687 139
That you don't know what's wrong with it is also very telling.

Try stockcharts.com. I'm sure you can find an explanation of order types there.

Db
:LOL:

Outsourcing your explanation to somebody else. Why do you keep talking about order types? Just keep on trading with stop limits and no market data. I am sure that major firms will be using straight lines to make major decisions in no time. :whistling
 

piphoe

Legendary member
10,038 194
At times I've watched a contract price "oscillate" quickly one tick back and forth back and forth b/w bid and ask....yo can't tell me that's "supply & demand" driven.. and not artificial manipulation in absence of true vol :rolleyes:
 

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