Stock market : share prices choosing mechanism .. Please help its basic question?

Simple. if a stock is priced at 100. and is owned by Mr A and Mr B.

and is wanted by C and D:

A wants to sell it at 100...C wants to buy it at 98 (the lower the better, c THINKS ITS TOO EXPENSIVE AT 100)...D sees that and says "well , screw you C I need THE STOCK more than you.....so posts a bid for 99.....if A isnt making a profit at 99 cause he bought it at 99...he says no way dudes, 100 final price.....Then comes B....he bought it at 90....and says fine....I l give it to D at 99, but then C says ...o **** I am going to loose the share and I want it bad....so he places an offer at 103 and buys both A and B shares.STOCK IS NOW RECORDED AS HAVING A PRICE OF 103.....(ie , chart goes up)

After 1 month stock is at 120..MR D says right I ll sell it for a profit...he goes to his screen and sees 1000 sellers selling at 120....and MR E buying at no higher than 119 and he thinks, "hell, I aint gonna sell this at 120 it is too competative...**** it, i ll out bid every other seller and sell it for 118....for a fast sale....BANG....trade is made...STOCK IS RECORDED AT 118 AND THE GRAPHS YOU SEE ON PAPERS DROP DOWN......

AND THIS HAPPENS EVERY SECOND AT TOP SPEEDS.

There are no computers doing equations....lol.........the computers simply match prices and orders and give priorities to a trade and various other things...but the fundamentals are simple!!!!!

I had this exact same question, I asked my dad "who decided the prices of the share?" and he said 'Supply and demand blah blah blah...' I was none the wiser. Anyway i did some research and Its all decided by huge computers/servers at each stock exchange ie. NYSE, LSE, JSE...

How it works is the brokers communicate to the computer and tell them how many traders want to BUY shares and how many want to SELL shares (Of a particular type ie AAPL) Then the computers use all sorts of equations to decide the price.

Thats how the daily fluctuations are decided but the really big increases (or decreases) are down to the company's profit forecast or actual profit. That happens 4 times a year but the price can go down drastically before that if a key element of the company is affected (say steve jobs dies or the price of components in china go up alot) Hope that makes sense

hOUSAS i right, read his/her answer too :) ( still think they are computers to gather all the data from the different brokers)

If there is a mismatch in demand n supply the price of a share goes up or down .True.It is decided by both the buyers n sellers.Example.

Mr.X has offered 100 shares to sell at Rs.150 per share through his broker.Mr. Y has desired to buy the same share at Rs.145 per share through his broker.Mr. Z has offered the same share at Rs.147 for sale through his broker.If all of them stick to their price no trade will happen. The trade may happen if Mr.X or Mr. Z bring down their their quotations to Mr. Y 's level of Rs.145 or Mr.Y raise his buying price to Rs.147.Either way the trade will be done.

The pricing mechanism has some thing to do with the quantity of shares offered for sale or desired to be purchased.It is not independent of quantity.If demand exceeds supply can the price fall?Or if the supply exceeds demand can the price rise?

Hope u have got the answer.

supply and demand has nothing to do with share prices.

Share prices are determined by investor sentiment as to how profitable a company is going to be. Stock prices are determined by what people are willing to pay. Plain and simple. If the feeling is that an individual company is going to exceed its profit estimates, prices ususally go up.

In times like this, over the past year and a half, stocks have tumbled because people have feared that the recession would reduce profits.

Recently, there has been some recovery, as people are starting to believe that the recession may be nearing its end, and hence ccompanies will start to become more profitable again, therefore driving up the prices.

Standard supply and demand rules apply. Otherwise the Efficient Market Theory would be a cartoon. It's an attribute of Free Market Capitalism. Pricing today is still handled by stock market specialists' order book in each exchange pit. OTC by market maker. I know cause I was one.