Investors new to stock investing do not understand how stock moves through the marketplace. The fact of the matter is that it is a very simple concept. The main participants in the stock market are the stock buyers and sellers along with the brokers or middlemen. If you really look closely at how the stock market operates you will realize that it is very similar to the real estate market.
Below is a situation detailing a stock trade:
John wants to dump 10 shares of Apple Computer stock for $20. He tells his broker to make the trade for him as soon as possible.
On the other hand, Robert want to invest in 10 shares of Apple for $20. He tells his broker to place a trade for 10 shares in Apple Computer Stock.
Robert’s stock broker facilitates the buy order, while John’s broker places the sell order.
At this point 10 shares have been exchanged from John to Robert. John now has $200 in cash, while Robert has $200 in Apple stock.
In spite of all that, the stock brokers who conducted the transactions for the buyer and seller received transaction fees. Consequently, the actually proceeds from John’s sale of his stock is $200 less the fees. Furthermore, Robert actually paid $200 plus fees for his 10 shares.
Later on if Robert decides that he wants to get rid of his shares in Apple, then the trading process will repeat. This time, however, Robert will have to pay a selling commission versus a buying commission. By the same token, if John wants to get more shares in Apple, he will have pay a brokerage fee for buying rather than selling this time around.
Essentially, stock transactions take place between buyers and sellers of stock with the broker facilitating the sale. Furthermore, buyers and sellers pay commissions to their broker for each stock trade they place.
Need help understanding stock market investing.