An exchange is an organised market where buyers and sellers meet. A share price is not set by the company: it results, continuously, from the confrontation of supply and demand.
How a price is formed
At every moment, buyers offer a price (the bid) and sellers ask for another (the ask). A trade happens when the two cross. The last traded price becomes the “quote”. The more trading there is (liquidity), the narrower the bid/ask spread, and the easier it is to buy or sell without moving the price.
Placing an order
- Market order: executed immediately at the best available price. Simple, but with no price guarantee.
- Limit order: executed only if the price reaches your limit. You control the price, not the execution.
- Stop order: triggered when a threshold is crossed, often to cap a loss.
Primary vs secondary market
The company only receives money on the primary market (an IPO, a capital increase). After that, you trade your securities with other investors on the secondary market — that is where you operate day to day.
À retenir
- ✓The quote is the living result of supply and demand, not a value decreed by anyone.
- ✓Liquidity reduces implicit costs (the bid/ask spread).
- ✓Choose your order type depending on whether you prioritise price or execution.