Stock market beginners want to know how stock changes hands from trader to trader. The way that shares change hands is a fairly easy concept to grasp. It involves the stock seller, stock buyer, and the broker, who acts as a middleman. The way that stocks are bought and sold is similar to the way that houses are bought and sold. In both situations the broker merely administrate the transaction for a fee.
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.
Robert wants to buy 10 shares of Apple Computer for $20. So he puts in an order with his broker to buy 10 shares of Apple.
Robert\’s stock broker facilitates the buy order, while John\’s broker places the sell order.
Once the transaction is done Robert has 10 shares of Apple and $200 less in cash, while John has 10 shares less in Apple stock with $200.
Understand that the stock brokers received transaction fees or commissions for facilitating the trades. With that said, the actual amount that John netted from the sale of his shares is $200 less the brokerage fees. On top of that, Robert actually paid more that $200 for his stock when you include the transaction fees.
It may come a point in time when John figures that he wants to invest in Apple stock again. In addition to that, in the future Robert might want to sell is Apple stock. Either way the stock buying and selling process will repeat. Only this time John will be paying a buying fee and Robert will be paying a selling fee.
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.
Learn stock market basics now.
How Stock Is Bought And Sold
No comments:
Post a Comment