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How do stocks get their prices?

Updated: 9/11/2023
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11y ago

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The stock market connects offer and demand, which means that investors who willing to sell find a demand of others in the Stock Market. If the price of a stock is $40.00 and someone wants to buy a certain amount of stocks he has to pay a higher price because of the offers lying above that level. If one wanted to sell the stocks for a lower price this would have already happened at a stock price of 40.00.Therefore, the cheapest offer which can be found lies slightly above 40.00 at, for example 40.02. This is the price the investor has to pay. This results in an increase in the stock price. If a stock is little popular there may be a lower offer of stocks what can make the cheapest offer much higher at, for example, 40.40. A purchase of stocks would cause an increase in the price of 1%. Therefore it is necessary to use order limits and tell your bank that you won't pay more than a certain price (40.05) in order not to pay a too high price.

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