The Short Version
The stock market is a network of exchanges where buyers and sellers trade shares. Prices move based on supply and demand: if more people want to buy a stock than sell it, the price rises, and vice versa. Every quoted price has a 'bid' (the highest price a buyer will pay) and an 'ask' (the lowest price a seller will accept); the gap between them is the 'spread'.
Explain It Like I'm 10
Think of the stock market like a giant trading-card show. Everyone brings their cards (stocks) and shouts out prices — 'I'll pay $5 for that card!' or 'I'll sell mine for $6!' The stock market is just a much bigger, faster, computer-run version of that same trading floor, matching buyers and sellers all day long.
The price of any 'card' changes constantly based on how many people want to buy it versus how many want to sell it. If suddenly everyone wants the same trading card, the price shoots up. If everyone wants to get rid of it, the price drops — nobody sets the price on purpose, it just comes from all those trades happening at once.
Step-by-Step Example
- 1 You want to sell your baseball card. You say: 'I'll sell it for $10' — that's your ASK price.
- 2 A buyer says: 'I'll only pay $8 for it' — that's their BID price.
- 3 Neither of you moves, so no trade happens yet — this $2 difference is called the SPREAD.
- 4 A different buyer really wants the card and agrees to pay your $10 asking price.
- 5 The trade happens at $10 — that becomes the new 'last traded price,' just like a stock quote you'd see on an app.
- 6 If ten more people show up wanting that same card and only you have one to sell, the price you can ask keeps climbing — that's supply and demand in action.
Quick Recap
- ✓ Bid / Ask: the buy price and sell price currently available.
- ✓ Volume: the number of shares traded in a given period; higher volume usually means it's easier to buy/sell without moving the price.
- ✓ Liquidity: how easily an asset can be bought or sold without significantly affecting its price.