This question has bugged me for ages. I understand that on a base level, the price of a share or stock, is governed by demand and supply. The supply of a stock is for all intents and purposes, finite, so if the demand for that stock increases, the price increases. Obviously when demand decreases (or supply increases) the price should drop.
All good, perfectly understood. Now, let's assume I have 1000 shares in Yahoo. Today's share price is roughly $27. That means that I can sell my 1000 shares and I will receive $27,000 dollars for those shares. To sell those shares, there needs to be a buyer, who will pay $27,000 to buy those shares, or a number of buyers, who will all pay $27 per share, for a percentage of those 100 shares (e.g. 10 buyers each buy 100 shares).
What I would like to know is three things:
- What happens when there isn't a buyer for my shares?
- What happens behind the scenes when I sell my shares?
- What is the underlying process, that allows my 1000 shares to be sold to one or more buyers at the price I agreed with my broker (or online trading account)?
I am trying to understand how the inner working of the stock market function. There needs to be two parties at the exchange, who agree a price, but what doesn't make sense then, is that my price has already been set? It is the point of exchange, which I think is the black box I don't understand.
I'd love some feedback on this. I am interesting in creating a computer model of a stock market, and I need to understand this issue before I can continue.
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