How markets actually work
There is no central authority setting prices. There is a queue of buyers, a queue of sellers, and the price where the two shortest queues meet.
Most people picture a stock market as a place where prices are announced. It is closer to an auction that never ends, with two queues.
One queue holds everyone willing to buy, each with the highest price they will pay. The other holds everyone willing to sell, each with the lowest price they will accept. When the best buyer's price meets the best seller's price, a trade happens, and that trade is the price you see quoted.
The two numbers underneath the one you see
- The bid. The highest price anyone is currently willing to pay.
- The ask. The lowest price anyone is currently willing to accept.
- The spread. The gap between them — which is the cost of changing your mind immediately.
For a heavily traded company the spread might be a penny. For something rarely traded it can be several percent, and that difference is a real cost you pay on the way in and again on the way out.
A share price tells you what one buyer and one seller agreed on most recently, for however many shares they exchanged. It does not promise that you could buy or sell a large quantity at that price.
Why prices move when nothing happens
A price can move on a day with no news because the queues changed. A large holder needing cash lengthens the sell queue. A fund tracking an index that has just added the company lengthens the buy queue. Neither has an opinion about the business.
This is why chasing an explanation for every daily move is usually wasted effort. A great many moves are somebody's liquidity problem, not a judgement on the company.
Who is on the other side
Every time you buy, someone is selling to you. They may know less than you, more than you, or exactly the same and simply need the money. It is worth sitting with that for a moment before assuming a trade is an obvious opportunity.
It is a mechanism for matching people with different needs and different time horizons. Treating it as a scoreboard that rewards being right is the fastest route to confusing a lucky trade with a good one.