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When you look up a stock's price at a broker, where does that number come from, and who decides if it goes up or down?

Sometimes it's said that "supply & demand" determines stock prices. This is a broad description, I'm looking for more detail. Supply and demand could be defined here as how many shares people want to sell vs buy. Is there ever a buyer without a seller in the vast majority of cases? Aren't those typically in more or less perfect balance, and would therefore not change the stock price?

Is the price swayed by really big sales ($10,000,000 lots for example) that are difficult to match for an electronic system, and there is actual human-to-human negotiation on a price?

Is there a master calculator for a given index that takes a bunch of factors and provides a "true" value that every broker pulls from to set the price?

This has been a longtime question of mine without a really satisfactory answer.

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At a high level, the market (buyers and sellers) determine the price, not some mythical "calculator". How that is determined is that buyers and sellers come together and agree on a price to transact at. The exchange takes care of all of this - there is no human-to-human interaction in exchange trades.

For most stocks, there are many buyers and many sellers. But they all have different prices that they are willing to buy or sell at. This is illustrated in the order book in a market. It contains all of the prices that buyers are willing to buy at (bids), and all prices that sellers are willing to sell at (asks). When a buyer is willing to buy at a price that a seller has indicated (the "ask") then a trade is made at that price. Each order also has a amount that is asked for or up for sale which can change the matching slightly, but that's the high-level process.

So a broker may be publishing the last transaction price, or may show you the bid and ask separately. So if you want to buy a stock at the current "price", you'd pay the ask price. If you want to sell at the current "price", you'd pay the bid price. Those may be very different than the last transaction depending on the liquidity (number of buyers and sellers) and the momentum of the stock.

Is there ever a buyer without a seller in the vast majority of cases?

Well, there are almost always buyers that want to buy at a certain price, but there may be no one willing to sell at that price. It's only when those prices converge that a trade is made.

Sometimes it's said that "supply & demand" determines stock prices.

That's true, but it may make more sense if you think of "supply" as sellers willing to sell at the current bid and demand as buyers willing to buy at the current ask. If buyers are more "aggressive" than sellers (meaning demand is high), then as buyers fill the current seller's order, the next seller's order up the ask chain is filled and the "price" rises. And vice-versa for high supply.

For example, I may be willing to buy Apple stock at $250, but if there is no one that's willing to sell for $250 then my order will go unfilled. At the same time, if there are other buyers that are willing to buy for more than $250, then those orders will be filled before anyone is willing to sell at my price. so it would take a lot of sellers (supply) to fill all of those orders and bring the price down to my level.

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    The only thing that I'd add to this thorough answer is that a broker can do large cross trades where he matches buy and a sell orders for the same security across client accounts and then reports them to the exchange after the trade is consummated. Cross trades must be executed at the prevailing market price at the time of the trade.
    – Bob Baerker
    Nov 6, 2019 at 15:15
  • If everyone who wanted to trade submitted market buy or market sell orders, does that mean the price would not change?
    – John
    Nov 12, 2019 at 23:38
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A broker allows you to trade on a stock exchange. That stock exchange keeps a list of buy&sell orders that came in from multiple brokers, and repeatedly determines a price at which the buy orders and sell orders are balanced. That means the buy orders at or above that price are matched with sell orders at or below that price. The stock exchange then reports this equilibrium price back to the broker.

So the data you get from your broker is a price from the recent past. But there are likely buyers remaining that would buy at a lower price, and sellers that would sell at a higher price. The stock exchange couldn't match those offers.

For this reason, you can give your broker an order to buy below the price he quotes you. Your broker won't blink an eye, and will just forward your offer to the stock exchange. When new sellers enter the market, they may be matched with your offer, but there's no guarantee that this will happen.

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