[OT] Stock Market Newbie questions on trades of shares

Well market makers are allowed to do naked short sales (sell stock they don't own) but nobody else. Normally you would be doing deals with people who actually have the shares. Although there are 3 day delivery rules which sometimes get violated. (FTD)

Also, yes, companies can create stock out of thin air and sell them or give them out to employees as compensation, etc.

There's time when the market has no reasonable bids, but typically algorithms will be watching for insanely low prices (after the flash crash) and ready to swoop in if things get low enough.

Dougster --> "There's time when the market has no reasonable bids"

The bid prices were what prompted me to ask the question. I used to be under the impression that the current stock price was the price, period. But then I saw bids and starting thinking it was more fungible that that (and my earlier understanding was too simplistic).

Market makers have certainly obligations to provide liquidity but sometimes there is great uncertainty and low liquidity so they have to crank up their spreads.

Oh, one last thing. Transactions the size you are talking about typically take place off the exchanges in "dark pools" (aka Alternative Trading Systems). They still have to be reported, but not until the end of the day. Lots of potential for corruption there no?

Cool. I learned something today. Market makers exist. They facilitate trades and liquidity. Thanks Dougster!

On dark pools. That's what I figured. Like in juice's example where he buys $1 stocks then sells them for $500. To go to these dark pools, Does one need to smoke cigars and drink brandy?

Another thing that bounced around in my head. Say it was 2004 and bought AAPL for $8/share (like $4 million worth of it). Then I had to foresight to sell it end of 2007 near the high of $200/share (paying gains tax). Then again, I had the forsight to buy all of those shares back again at the 2008 low of $96/share. Then I head onto them until they got to $713/share a few years back (for the split) and sold those shares (paying gains tax).

Hypothetically you would be hella rich. I was just wondering if anything like that actually happens IRL.

@Dominic every stock has a Specialist (market maker) some specialists are regulating more than one stock and some stocks have more than one specialist.

I realize that's NOT how you trade on the market. And I should look for ETFs or some other balanced, no-risk, low-commission funds. I'm just thinking out loud now that I finally getting around to try to understand and use this stuff.

Thanks twenty-five. I figured that had to be some glue piece in the middle that I was missing. Just like I guess no one ACTUALLY goes down to the market floor of the NYSE with a derby hat, suspenders, and papers in hand and yells, BUY! SELL! on my behalf. That would not scale.

^^^There is never no risk but it can be managed by diversifying which what you are describing in ETFs and Mutual funds. It is important to not just look for low commission but you also need to be sure that the management fees charged are low, fees can eat a substantial part of your generated profits that is why Index funds have become popular, management is a computer algorithm cutting down on the costs involved with actively managed (think a human who has to be paid vs a computer program which is purchased doing the work)

Invest your money with your talents and abilities. Invest in your own ventures. Invest in yourself.

SJG

Warren Buffet, a billionaire has bought stock cheap long ago and likely held onto some of it long enough to make a small fortune on just that stock. Most ordinary people do not buy and hold stock for that long. They sell when it drops and buy it back when it goes back up thinking they are missing out on a big rally so their gains are not as good as the market. It's human behavior to follow the herd. If everyone is running for cover, do you stand still or run for cover? They sell and buy at the same time or eventfully join the herd for the most part.

As far as billionaires or multi. Millionaires go, a stock needs a lot of high volume liquidity to not shoot the price of the stock down or up by much. Example shadowcat is selling his shares of tuscl at $5 a share and has 1000 shares for sell. John69 puts in a buy order for 1100 shares for 4.95 a share. Somehow close to these prices the stock would get bought and sold. Now suppose lots of others have buy and sell orders like 5.50 a share 7 a share but the quantity is only a 1000 shares and they never thought they would get any buyers at that high a price. Along comes millionaire juice saying he's going to buy a whopping 10,000 shares of tuscl and puts in a market order. To satisfy that order he buys up all available shares and the price of the stock might jump to $10 a share or some very high price to entice enough sellers to sell to juice. Without enough liquidity, you overpay. The opposite might happen if juice that the stock was a bad move and decides to put in a,market order to sell those 10,000 shares.

If someone put in market order for a billion shares for tuscl and I had some, I'd happily sell everything I had for $100,000 a share if the billionaire put in a market order and there weren't enough shares to fill the order without me selling mine. If I sold 1000 shares at 100K each, well that would make my day.

If you have enough money to change the stock price, you are changing things with your buying and selling. The vulume or liquidity may be really low if you are changing the stock price. I've changed stock prices by pennies and I don't want to do more than that.

If you are making a stock go up or down, you may be a big part of the market for the stock.

Pretty cool example, sharkhunter.

I picked up a couple Warren Buffet books from the library (I went to initially get twentyfive's and Che's suggestions but they were out until 3/7/17 and still had hold infront on mine). Mr. Buffet mentions that he limits himself to investing in 10 companies. I was both surprised and not surprised to read that.

@ Dominic Problem with the way Warren Buffet trades is that you can't do the same as he does, he picks a company goes in to visit is escorted and shown around, than he negotiates a sweet deal for his 50meg or more, investment usually picking up a better deal than you or I could negotiate. He often gets preferred shares, a better dividend rate, sometimes a seat on the board, normal investors could never get the kind of perks that he will avail himself of. The only thing that you can do that is similar to the OoO is buy good quality stocks and hold for long term, he is not a trader he is usually a long term investor. Referencing your question about dark pools One thing to keep in mind buy too much and cause too much of a price shift on the major exchanges, you will trigger an alert that if the movement is larger than a certain size it can halt trading in a company or even suspend trading at least long enough for the SEC to take a look and be sure that you are not a manipulator. that is another reason to avoid penny stocks they are so small in market cap that a non accredited investor with enough cash or credit can manipulate them to cause price fluctuations that are abnormal.(manipulate price)

Invest your money with your talents and abilities. Invest in your own ventures. Invest in yourself.

Don't subsidize the Warren Buffets of this world. Don't subsidize the Dougster's of this world.

SJG

Thanks, twentyfive. That level of involvement makes sense for a billionaire like Warren Buffet. No longer he limits himself to a handful of companies if he's going into that level of detail and involvement. It would be hard to know more than a few number of companies with that level of detail. Ah.

It's nice to read that there are protections against stock trading price manipulation of market "whales." I figured it might be a problem to buy/sell a larger number of stock. I think i will stick to a diversified portfolio. It seems easier and not to mention safer.

The most interesting thing has been reading and learning about the specialists. It seemed like there was a fiction point and it makes sense that there would a person (or persons) to reduce that friction and enable liquidity. I blame my analytical mind.

I'm living rent free in txtityfag's brain. lol.

That's cute you keep bumping my thread. Too bad it's the internet baby troll.

Invest in your own affairs, invest in yourself, and into your circle of close associates. All the more so now that you see how rigged the stock market is.

SJG

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I just want your money texas fag. wire it to me. then you can use any restroom. Your secret is safe with me.