I read these damn books and articles online that seem to touch on the nuts and bolts of how the stock market works, but I want details! So I have some questions:
Who do I buy stock from?
I've seen references to a "dealer" of some kind, which kinda makes sense. I've traded as few as 10 shares before and there's always a buyer or seller. They can't be individuals. Is this "dealer" some kind of investment bank that holds assloads of shares of all kinds of companies to trade with individual investors like myself? This leads me to...
What's the relationship of bid/ask prices to share price?
I'm assuming the aforementioned "dealer" (if that's what you call it, and if it exists in the form I'm presuming) sets bid and ask prices. Is the spread between bid and ask how the "dealer" makes money? Is the stock price determined from bid/ask prices, or are bid/ask prices set around share prices? This leads to...
How do stock prices change so quickly?
I have E*TRADE's streaming quote thingy up. It shows the last exchange a stock is traded on (MVL, for example, was just traded on NYSE, Chicago, NASDAQ Listed). I'm assuming each trade can affect a stock price. This is probably related to bid/ask prices and whoever's responding has answered the question above. So if stocks are trading hands at exchanges all over the country, how is the "consensus" formed on the stock price? Do my miniscule purchases of 100 shares or less contribute to that at all? Also, if I set a limit order to buy, I'm basically waiting around for an ask price to match, right? Does that mean my limit order is calculated into the bid price in any way?
Sorry for the lengthy questions, but if anyone can answer, I'll be most grateful! I trade just fine not knowing the answers to these questions, but they've been poking my curiosity for years. Thanks!
Who do I buy stock from?
I've seen references to a "dealer" of some kind, which kinda makes sense. I've traded as few as 10 shares before and there's always a buyer or seller. They can't be individuals. Is this "dealer" some kind of investment bank that holds assloads of shares of all kinds of companies to trade with individual investors like myself? This leads me to...
What's the relationship of bid/ask prices to share price?
I'm assuming the aforementioned "dealer" (if that's what you call it, and if it exists in the form I'm presuming) sets bid and ask prices. Is the spread between bid and ask how the "dealer" makes money? Is the stock price determined from bid/ask prices, or are bid/ask prices set around share prices? This leads to...
How do stock prices change so quickly?
I have E*TRADE's streaming quote thingy up. It shows the last exchange a stock is traded on (MVL, for example, was just traded on NYSE, Chicago, NASDAQ Listed). I'm assuming each trade can affect a stock price. This is probably related to bid/ask prices and whoever's responding has answered the question above. So if stocks are trading hands at exchanges all over the country, how is the "consensus" formed on the stock price? Do my miniscule purchases of 100 shares or less contribute to that at all? Also, if I set a limit order to buy, I'm basically waiting around for an ask price to match, right? Does that mean my limit order is calculated into the bid price in any way?
Sorry for the lengthy questions, but if anyone can answer, I'll be most grateful! I trade just fine not knowing the answers to these questions, but they've been poking my curiosity for years. Thanks!