Consumers Digest

Can you help explain how individual stock prices change daily?

I know buying and selling changes the price, but how does it change daily? Also, those day traders on the floor at the new your stock exchange, what are they all doing, running around the floor? How does buying and selling give us the 3 indexes (Dow , S&P, and Nasdaq) ? Please advise, as I am new to the market. Thank you, will choose best answer. Thank you!! that was so helpful! you're the best!

Public Comments

1. the buy and the sell prices make the changes - if the person with shares to sell says sell at any price then the broker can offer them at less than the last sale price there fore the price goes down. Some in reverse for buys - if the buyer sets a prepared to pay price higher than the offered prices then the price goes up again. Never have quite understood all the running around the floor but must be something to do with placing orders. The indices are taken from a selection of companies and give averages to use as guide.
2. Prices change by the second due to supply and demand. If someone sells shares through the brokerage and if there isn't any buyer at that time, the market maker purchases the shares at a reduced price for a later sale when a buyer requests those shares. If a buyer requests stocks and the market maker does not hold any of those stocks, he sells the stocks at a higher price waiting for sellers in the future to cover the sell. Although this is all done electronically, that is what basically happens. You can purchase the following ETFs that reflect the main indexes. Diamonds (DIA) that follows the DOW index. Spiders (SPY) that follows the S&P500 index. Power Shares QQQQ (QQQQ) that follows the NASDAQ100 The traders on the floor at the NYSE are a tradition and are not necessary for an equity market. The NASDAQ exchange is 100% electronic since there was not a tradition for floor traders..
3. Listed stocks are exchange traded through a specialist. Buyers and sellers still set the price. if a stock is trading at 9. i may have to pay $9.01 to buy some, i may have to accept $8.99 to sell. There are other variables, rumors, wars, earnings, etc. along with volume of sells and purchases, that can affect daily price. The indexes are related. the DOW is actually 65 large cap stocks. the average is 30 of them, of various industries. sort of reflects the broader economy. The S&P 100, and 500 are the 100 and 500 largest listed corporations. A broader economic sampling. The NASDAQ is an index of the 100 largest non exchange traded stocks. There is overlap. remember these indexes are comprised by weighted average on entrance of stocks we all know and love. Walmart, McDonald's, IBM, Intel, Microsoft. All these stocks belong to S&P 100, and 500, and DOW. Intel and Microsoft are NASDAQ listed also. With all this said, ignore the indexes, and averages, for now. Trade good dividend paying stocks.