How stock prices are set
A stock's price is the price at which the last buyer and seller agreed to trade. It rises when buyers are more eager than sellers and falls when sellers are more eager, which is supply and demand acting through the order book.
The order book
On an exchange, buyers post bids and sellers post asks. When a bid meets an ask, a trade happens and that becomes the new price. The gap between the best bid and best ask is the spread.
Market makers
Market makers post both bids and asks all day so there's always someone to trade with, earning the spread in return. Without them, thinly traded stocks could go minutes without a price.
Bonding curves
A bonding curve replaces the order book with a formula: the price depends on how many shares are in circulation, so every buy raises it and every sale lowers it. There is always a price, even for something brand new.
Journey Shares prices every listing this way, which makes supply and demand directly visible: buy and the price goes up by exactly the amount the curve says.
Common questions
Who decides a stock's price?
No single person. The price is wherever buyers and sellers agree to trade, so it reflects the balance between how many want to buy and how many want to sell.
Why do stock prices change every second?
Because trades happen every second, and each one can be at a slightly different price as buyers and sellers react to news and each other.
Key terms
- Supply and demand
- : Supply and demand is the model that explains prices: when more people want something than is available, its price rises; when more is available than people want, its price falls.
- Order book
- : An order book is the live list of buy and sell orders waiting at each price for a stock.
- Bid-ask spread
- : The bid is the highest price a buyer will pay right now, the ask is the lowest price a seller will accept, and the spread is the gap between them.
- Automated market maker (AMM)
- : An automated market maker is a pricing formula that always quotes a price to buy or sell, instead of matching buyers with sellers in an order book.
- Bonding curve
- : A bonding curve is a formula that sets an asset's price from how many units are in circulation, so each purchase raises the price and each sale lowers it.
- Liquidity
- : Liquidity is how easily something can be bought or sold quickly without moving its price much.
- Market equilibrium
- : Market equilibrium is the price at which the quantity buyers want equals the quantity sellers offer, so there's no shortage or surplus.
See also
- How prices work in Journey Shares
- How to learn to trade stocks without risking money
- Free stock market simulator: what to look for
- Real-time trading explained
- Paper trading vs real trading
- Streamer stocks: trading Destiny, Hasan Piker and other commentators
- Economics glossary for college students
- Teaching economics with a stock market game
Practise with $10,000 in play money
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For learning only. This isn't financial advice.