Reading price announcements

[mogley]

Code Last % Chg Bid Offer Open High Low Vol
CBA 59.680 -1.27% 59.640 59.700 60.390 60.400 59.360 1,667,970

Ok another question. I feel bad for spamming this forum but I hope this helps other newbies too!

Had a search but couldn't find what I was looking for.

Anyway, i'm just trying to interpret the price announcements for CBA.

As I understand it:

Bid = Price at which I can sell to a bidder
Offer = Price at which I can buy from a seller
Open = Price the stock opened at
High = Highest price reached
Low = Lowest price reached
Vol = Amount of shares traded
Last = Last price the share traded at

Now I have a couple questions.

Who sets the Bid price?
Who sets the Ask price?
How is the last price determined?
Where are the market forces, ie demand and supply?

 

[doctorj]

Bid = Price at which I can sell to a bidder
Offer = Price at which I can buy from a seller
Open = Price the stock opened at
High = Highest price reached
Low = Lowest price reached
Vol = Amount of shares traded
Last = Last price the share traded at

Tick!

Who sets the Bid price?
Who sets the Ask price?
How is the last price determined?
Where are the market forces, ie demand and supply?

Bids and ask are set by market participants, they're the highest bids (and lowest asks) that are yet to be matched to create a sale. Think of them as trades waiting to happen, where people are willing to wait in a queue to get the price they want.

Last price as as it sounds. It's the price of the last matched trade (bid and ask).

Market forces could be discussed for hours and hours on end, but broadly, you'll see the effects of supply and demand in the way the 'last price' fluctuates.

 

[mogley]

Thanks for the reply.
I'm still a little confused.
So the last price is what we deem the market price and is the price quoted all over the news and press and is the last price at which a buy and sell order was matched?

If that's the case, what is to stop me from selling a share at $10 to some fool who is willing to buy it for $10 when the market only values it at $2?
If that was the last trade would that be the last price?

I still don't understand the significance of bid/ask prices.

To me, you buy and sell when those two parties can agree on a price. If you try to sell too high, you lower your price until you find a buyer. It's just like selling a car. And this interplay determines the market price.

I don't understand why there is all this bid/ask business.

 

[prawn_86]

Sometimes you do see manipulation of the last price.

IE - a share may have been trading at say 30c all day but right at the end someone will sell of say 28c to push the price down so it doesnt look like it has done much for the day.

I like to use VWAP (volume weighted average price) as my guide. This gives you the average price of the day according to the # of shares traded at each price. Very handy and more reliable than close data

 

[doctorj]

Think of the bid and ask this way.

There is a big room, there are a whole bunch of people holding signs above their head with a price and a number of shares on it. Orange signs are people that are looking to sell shares and blue ones are people looking to buy. They're happy to wait around until someone matches the price they're hoping to sell at.

Then, from time to time a new person with their own sign walks in to the room. He's got a price and a number of shares written on it. Everyone in the room is pretty keen to buy or sell so they all check out what price the new guy has and what colour sign. If it matches price with someone else already in the room, the first person already in the room (with the other colour sign) at that price matches up and we have a trade.
Also, people in the room get bored of milling around waiting, so occasionally they'll adjust the price on their sign to skip the queue - and we have another trade.

More confused? *shrug* I tried.

 

[mogley]

Think of the bid and ask this way.

There is a big room, there are a whole bunch of people holding signs above their head with a price and a number of shares on it. Orange signs are people that are looking to sell shares and blue ones are people looking to buy. They're happy to wait around until someone matches the price they're hoping to sell at.

Then, from time to time a new person with their own sign walks in to the room. He's got a price and a number of shares written on it. Everyone in the room is pretty keen to buy or sell so they all check out what price the new guy has and what colour sign. If it matches price with someone else already in the room, the first person already in the room (with the other colour sign) at that price matches up and we have a trade.
Also, people in the room get bored of milling around waiting, so occasionally they'll adjust the price on their sign to skip the queue - and we have another trade.

More confused? *shrug* I tried.

No that makes more sense now!
Then why is it though that when I buy a stock at market order I am actually buying from the guy with the orange (ask) sign?

 

[doctorj]

An at market order is the equivalent of walking in with a sign with a number of shares on it and taking the best price you can find.

 

[Julia]

Think of the bid and ask this way.

There is a big room, there are a whole bunch of people holding signs above their head with a price and a number of shares on it. Orange signs are people that are looking to sell shares and blue ones are people looking to buy. They're happy to wait around until someone matches the price they're hoping to sell at.

Then, from time to time a new person with their own sign walks in to the room. He's got a price and a number of shares written on it. Everyone in the room is pretty keen to buy or sell so they all check out what price the new guy has and what colour sign. If it matches price with someone else already in the room, the first person already in the room (with the other colour sign) at that price matches up and we have a trade.
Also, people in the room get bored of milling around waiting, so occasionally they'll adjust the price on their sign to skip the queue - and we have another trade.

More confused? *shrug* I tried.

Great imagery, Doc. I'll never enter an order again without picturing lots of little people with their orange and blue signs!!!

 

[BlingBling]

Mogs,
Head to asx.com.au and get into their online classes. Everything you have asked is in the online classes and very well explained. The classes even have tests at the end of each chapter, so you can see how well the info is sinking in.