What’s the ‘need’ for the stock prices to change every minute?
In: Economics
What typically happens in a market for a particular share is that there is an “open order” list. There is a list of buyers offering to purchase certain quantities of the stock at various prices. There is also a corresponding list of sellers willing to sell some quantity of this stock at various prices. When there is a “match” between a buyer and seller, the trade “clears” ie a buy-sell transaction occurs. (Note: a lot of this happens electronically nowadays although there are actually floors where this happens by human traders calling out)
Since this list is dynamic and trades happen all the time (ie every few milliseconds – electronically) the latest “cleared” trade is reflected as the current price. So the price is updated every trade. This price reflects most recent “past” trade so it is no guarantee that any buyer or seller can immediately achieve the same price in the future (even if that future is a fraction of a second later).
Too many people and too many stocks. If there were only two people who wanted to trade the only stock, you could probably get by with setting the price once a day. With automated trades, I wouldn’t be surprised if stock prices were changing every nanosecond.
The price change reflect actual trades taking place at the time if there are more buyers than sellers the price goes up, because so many of the major stocks are traded every minute the shares also change.
It reflects ever-changing supply and demand. As more people want the stock, only by offering a bit higher price can they get more sellers to sell. Or as more sellers want to get rid of the stock, only by offering a bit lower price can they find more buyers.
The stock market is a haggle market. Buyers want to pay some low price. Sellers want some high price. Each individual is willing to pay a different price. One buyer wants to buy for $5.00. another one wants it more for $5.10. another wants it less for $4.80. etc. Each buyer has a different tolerance for the price of the stock. Same for seller side. If a buyer price meets a seller’s price, then a sale is made. The price at which that sale occurred is now the new price of the stock.
There is no “need”. This is how open markets work. Person A has a thing. Person B wants to buy it. They agree to a price, and the sale is done. The last sell price for a given stock is the price you see on the ticker. Youre not beholden to it and if you dont like the price you’re offered (whether buying or selling) you can look for other shoppers or not sell (or buy).
The price of the stock is determined by the last sale of the stock. So if I buy 100 shares of XYZ from you for $10, the price is $10. If 5 minutes later Joe buys them from me for $9, the price is $9.
There is no need for them to change every minute, but there are so many buyers and sellers that prices change constantly.
It’s not a need, just a consequence of how many trades are being made every minute.
Unlike a store, there is no such thing as a “fixed price” in a stock market. The stock price you see on the board is the last price anyone sold or bought that stock for. If you want to buy or sell a price you can sell or buy it for whatever you want, as long as you get someone who is willing to sell you or buy that stock from you at that price. If you sell a share for $1 per share that’s going to be the new price, until someone trades for a different price.
Buyers want to buy and sellers want to sell every minute, and they need to agree on a price. Each time a transaction happens, the price is made public.
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