Re:How the Stock Market Works
by skybrian on Monday August 05, 2019 @02:09AM
(#20611662)
"Market makers" ensure that at any time, there are standing orders to buy/sell that are close to the current market price (the difference is called the spread). If you buy/sell at market price, you are taking an existing offer at their price.
You could also do what they do. Instead of buying immediately at market price, you could enter a lower price and create a standing order to buy at that price. However, if the price goes up, you might miss out on buying the stock at all.
Similarly for selling. You can enter a higher price, but it won't sell if the market price doesn't go up.
Conceptually this isn't so different from what a grocery store does. They offer something for sale and wait for a buyer willing to pay that price. However, margins are much lower and prices change much quicker for stocks.
(Note: I'm not recommending messing with any of this.)
You could also do what they do. Instead of buying immediately at market price, you could enter a lower price and create a standing order to buy at that price. However, if the price goes up, you might miss out on buying the stock at all.
Similarly for selling. You can enter a higher price, but it won't sell if the market price doesn't go up.
Conceptually this isn't so different from what a grocery store does. They offer something for sale and wait for a buyer willing to pay that price. However, margins are much lower and prices change much quicker for stocks.
(Note: I'm not recommending messing with any of this.)