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From what I understand, the stock price is based on supply and demand. For example, if a stock that was priced at $0.01 was bought buy an investor who spent $5.00 (leaving him with 100 shares), it would drive the price of the stock up.

But I am wondering, who (or what) determines how much the price of the stock will go up, or down?

How do prices change? Is it a program that updates the price of every stock, every second, based on some formula? Or is it some speculating "geek" that hides in some wall street office, updating the prices on every stock he sees based on the market volume?

Thank you for any help. All help is greatly appreciated.

Kelsey
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1 Answers1

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The market price of a stock is based on nothing at all more than what two parties were last willing to transact for it.

The stock has a "bid" and an "ask" each is the value placed by a counterparty. For the sale to occur, one party must meet the other. The stock transacts and that is the price.

For a stock to "go up" people must be willing to pay more for it. Likewise, for it to "go down" people must be willing to accept less for it.

Matthew
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