How does a stock's price develop intraday?

jr07 · Dec 22, 2009

Hi

Am looking for resources that explain in detail how the price of a stock is determined throughout the day. What are the actual details behind supply and demand that work their way through to the price that one sees on a chart? Why does price go up 30 cents instead of 10 cents? I want to know in detail how the actual price is determined as the day develops... Of course there's buyers and sellers but how do their actions impact price? Who sets the price? and how is the price's move determined?

I also have a question about volume, if one is looking at a certain stock chart with a volume histogram at the bottom, does this volume include volume traded in options of this stock? How does this work? Since options are not the same as individual shares per se... if Someone purchases one call does this equate to one share as far as volume is concerned?

thanks
J

Kovacs · Dec 22, 2009

This is a good place to start:
http://www.amazon.com/Trading-Exchanges-Market-Microstructure-Practitioners/dp/0195144708

Some information is out of date but the principles are still valid.

traderum · Dec 23, 2009

Am looking for resources that explain in detail how the price of a stock is determined throughout the day.

Just try a search-engine, for example www.google.com

What are the actual details behind supply and demand that work their way through to the price that one sees on a chart?

Supply (sellers) and Demand (buyers), and the Market Maker (MM) between them. That is: the offers of sellers and buyers. A trade happens only if both sides agree on a common price, ie. seller and buyer both offer the same price, until then the offers of both sides are recorded in a public orderbook to be seen by everyone. Everyone can change his mind and his offer...

Why does price go up 30 cents instead of 10 cents? I want to know in detail how the actual price is determined as the day develops... Of course there's buyers and sellers but how do their actions impact price? Who sets the price? and how is the price's move determined?

That's like in real-life: say you want to sell your old car for say $3000.
There are some buyers interested in it, but they offer slightly less than what you ask for. Either one of them will accept your price or you will accept the offer of one of them. Only then a trade will occur, and this will be recorded in official books, goes to the chart etc...

I also have a question about volume, if one is looking at a certain stock chart with a volume histogram at the bottom, does this volume include volume traded in options of this stock? How does this work? Since options are not the same as individual shares per se... if Someone purchases one call does this equate to one share as far as volume is concerned?

No, volume is seperate for each instrument, ie. stock has its own volume and its options have their own.

You should learn what "Level-II" is, it is the orderbook. For example this article explains it:
http://www.investopedia.com/articles/trading/06/Level2Quotes.asp

nutmeg · Dec 23, 2009

A trade happens only if both sides agree on a common price,
-----------------------------

A trade happens only when two people disagree on price.

intradaybill · Dec 23, 2009

Quote from jr07:

Hi

Am looking for resources that explain in detail how the price of a stock is determined throughout the day.
J

Demand & supply, like any other product in an efficient market.

intradaybill · Dec 23, 2009

Quote from nutmeg:

A trade happens only if both sides agree on a common price,
-----------------------------

A trade happens only when two people disagree on price.

No, they must agree on current price, they disagree on future price, i.e. a trade happens when expectations are contrarian.

nutmeg · Dec 23, 2009

Ahhh... the old supply and demand ruse.

How about we begin with the mistakes of intra day trading. The fat finger, schizophrenic & insecure traders. Whoopsie, meant to short but hit the buy order. Or just one more Zero on the share count. Or the dsylexic trader who transposes the symbol.

What of the one equity only trader who fucks with people because he can and has a bankroll.

intradaybill · Dec 23, 2009

Quote from nutmeg:

Ahhh... the old supply and demand ruse.

How about we begin with the mistakes of intra day trading. The fat finger, schizophrenic & insecure traders. Whoopsie, meant to short but hit the buy order. Or just one more Zero on the share count. Or the dsylexic trader who transposes the symbol.

What of the one equity only trader who fucks with people because he can and has a bankroll.

...you are hanging around with the wrong people. What you described represents only 1% of liquid stock transactions