What does amount mean in stock trading
Ask price of a share - what it means and what it is for
Buyers and sellers come together to find the price of a share or a security on the stock exchange. The aim is that as many "papers" as possible can change hands. Of course, the respective price and volume play a decisive role.
In order to find an equilibrium price, i.e. a price at which buyer and seller "meet", all interested parties - i.e. buyers and sellers - indicate prices and quantities for which they are willing to trade.
The traded stock exchange price balances buy and sell wishes
In this context, the ask price represents the price at which a shareholder is willing to at least sell his or her share (s). The stockbroker (or today usually the automatic trading system of a stock exchange) collects all sales requests and lists them in the order of the prices with the corresponding quantities.
The asking price of a share - a low price
Since a shareholder naturally wants to sell his paper at the highest possible value, the ask price is only the lowest price at which he is willing to sell.
His motto is: I want to get as much money as possible for my share, but I will not offer it below the value “X” (the limit).
However, depending on the market situation, it may still receive a higher price.
In reality, several sellers can set the same letter prices at the same time. In addition, orders can be withdrawn at any time as long as they have not yet been executed. An order book in which all current buy and sell requests with volumes and prices are collected is therefore constantly on the move.
The bid price is opposed to the ask price
The counterpart to the ask price is the bid price.
This is the price or rate at which another participant is willing to buy a stock, currency, or other financial product.
From the buyer's point of view, the bid price is the maximum price he is willing to pay for the security in question. All of these purchase orders are collected in the same way as described above.
A concrete example of an order book
In this way, offers from sellers and buyers meet in an organized manner on the stock exchange. In the simple example it looks like this:
Buy orders; sell orders:
495 pieces cheapest 851 pieces best
30 pieces for € 99.00 150 pieces for € 99.10
825 pieces for € 99.50 240 pieces for € 99.75
508 pieces for € 99.80, 725 pieces for € 100.00
812 pieces for 100.00 € 356 pieces for 100.30 €
409 pieces for € 100.20 164 pieces for € 100.60
250 pieces for 100.25 € 350 pieces for 101.00 €
Now the broker compares:
At the price of 101, all sellers want to sell a total of 2,836 shares, but only buyers (cheapest) with 495 shares oppose this. If you lower the price, you always want to buy more but sell less.
At the price of 99, all buyers want to buy a total of 3,329 shares, but only sellers (ideally) with 851 shares contrast. If you raise the price, you want to sell more and more, but sell less and less.
The stockbroker or a computer uses the ask and bid prices to create the rate at which most buy and sell bids can currently be processed. In the example this is 1,966 pieces at a rate of 100 euros. This is then the current rate at which all corresponding orders are billed.
Here, all purchase orders limited to 100 and higher are processed at this price. In addition, all non-limited “cheapest” buy orders. At the same time, all sales orders with 100 and below are served, as well as all unlimited “best” sales orders. You can see that some participants in trading are served better than they have limited.
The exchange trades ask and bid prices
The example makes it clear what it is about: In reality, the whole thing is a little more complicated. Because in the age of electronic exchanges, volumes and prices are constantly in motion. New prices can be found in seconds. At least this applies to high-volume stocks that are traded in the Dax 30, for example.
Normally, the ask price is higher than the bid price, which means that the seller usually wants more money than the potential buyer is willing to give. If there were only two people currently on the market, which can be the case with very weak stocks, no deal would come off. This shows how important it is to only place limited orders in any case for securities with only low turnover. Otherwise you risk getting a very bad price.
The stock market price
Because there is not just one seller and one buyer on the market, but several, there are also different ask and bid prices.
And that is the rate at which, as seen in the example, most transactions take place - with bid and ask prices offered, i.e. buy and sell orders.
The stock exchange is the marketplace that organizes that ask and bid prices find each other - and that trading between more than 2 people can take place.
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