Hello. I am new to investing and about to open my first online stockbroker account. I'm reading a book right now that covers some basics on choosing stocks, how to buy and sell, etc.
One question I had was what determines the price of stock, and, specifically how supply and demand plays a role. In looking at the online websites for buying and selling stock, it looks like you just place a bid for a certain dollar amount and wait for someone to sell it for that amount. Suppose I bid for a stock at $5 and there are ten other sellers that want to sell at that price (I know in a real word situation there'd be a lot more sellers, I'm just using easy numbers for this example). If I am the only one wanting to buy that stock, and if I knew ten people wanted to sell it, the sellers would compete against each other until the lowest price was reached. This is no different than buying any other asset where the number of sellers exceeds the number of buyers. With an online brokerage account, though, from what I understand, It will just automatically purchase the stock for me at $5 as soon as one of those sellers clicks "sell" on their end. Those ten sellers don't have to really compete for price, it's just whichever one of them clicks "sell" faster will have sold the stock to me. On the flip side, if I want to sell at $5 and ten people want to buy, they wont need to compete to get the sale by bidding higher amounts- it will just sell at $5 to the first person who clicks "buy".