Question about how stocks work?

In your simplistic example. If the company only issues 10 shares of stock, and all 10 shares are purchased.

Chester would not be able to purchase 4 shares, he would have to wait till someone is willing to sell him a share.

Now if the company wanted to issue 4 more shares of stock to allow Chester to buy. That would actually decrease the value of the stock due to dilution.

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Question about how stocks work?

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They always go up

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I know it makes the price go up.

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This is wrong. It could go down. It could stay the same. Depends what the market price is.

Most stocks there are thousands of transactions every day. You put in a bid (a price you will pay) and the market which is now a computerized system, will look for buyers willing to sell their stock at that price. The price fluctuates constantly based on these transactions. The company itself only makes money based on the initial selling of the stock.

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If a company goes public and issues say 10 stocks. Maynard and Percy purchase 5 stocks each. Now, Chester purchases 4 stocks. Where did those 4 stocks come from?

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maynard and/or percy

Stock prices go when people are willing to pay more for a stock than the current price. It's a very simple bartering system. We use the term supply and demand meaning that if the supply is lower than the demand people will pay more for it than it's worth. That is why stock prices go up or down. If people really want to sell it then they are willing to sell it for less than it's worth. That's why a stock price goes down.

The amount of stocks are normally unchanged, unless a company issues more stock. People will put in an order to buy or sell. The seller holds onto the stock until they are sold. So I can put in a sell order at $10 but I own them until someone says they are willing to buy at that same price. If no one is willing to buy I may drop my price to $9.90 and then maybe someone is willing. That is how we track prices of stocks.

Thanks all you guys for the education. I think I have a better understanding now!