A newbie's question: how shares are traded through internet?

I don't understand how shares are traded through internet.

For example, if I want to sell 1000 shares, Mr. A placed an order of 500 and B placed his order of 1000 after A. What the trading will be? A and B both gets 500 or A gets 500 but B gets nothing? And how many shares I've sold? 500 or 1000.

Another question is a share has three prices: market price, bid price and offer price. If I want to buy share what price I pay, or if I want to sell shares which price will be used?

Thank you

Erics, Firstly you need an online account with a stockbroker, say someone like comdirect for UK trades,
then you need cash or stock in that account on which you can use to buy of sell,
to sell would be Bid, to Buy would be Offer,altought the terminalogy can change some use Ask if you want to Buy

Erics, sorry I pressed the post button in error, to answer you question on how you sell 1000 shares
once you account is set up and you want to sell, if you see the Bid/ask price and you want to sell at that ,just click the sell button and its done!
the stockbroker holds it in his account or he will sell it on to someone else.............

Erics, I should point out that for this to happen you need to have your shares in Electronic form, not paper
how this works is, when you open an account with an online broker any paper share certificate's need to be converted into electronic form,( I can't remember the correct word for it ) its just form filling and you have to send the certificates to the brokers, takes a week or so to complete..............

If you think about currency, this might give you a better idea of the bid, offer, market situation.

Let's say that you were going on holiday to the states and wanted to buy some US$. You go the bank or post office to buy the US$.

You see on the board that they currently have two prices for US$ - $1.85 and $1.87.

These two prices represent what the bank will sell US$ to you for, and what they will buy them back again for.

You want to buy US$ from them so you buy at the $1.85 rate, ie you get $1.85 dollars to the pound.

When you were away in the states, you didn't spend all your money and came back home with some left, and decided to convert it back to £ GBP again.

You go to the bank and they are offering the same price (not likely but, it saves confusion for the sake of this explanation). The price on the board is still - $1.85 and $1.87.

This time though, you do not get the $1.85 rate, as you are now selling dollars instead of buying, you get the other rate of $1.87. So for every $1.87 dollars, the bank will give you £1 GBP.

Here is the similarity...

The bank wishes to sell dollars at $1.87, this is the Offer Price - they are offering you the chance to buy from them at this rate. They also wish to buy dollars at $1.87, this is the price that they are bidding for them (the bid rate).

If you work out the maths, you will find that the bank have just made money on the deal even excluding commission costs. The purchase price of the dollars was more expensive for you as you didn't get so many dollars to the pound, but when you came to sell them back again, the bank didn't give you as many pounds back per dollar as it had originally cost you.

Another way to think of it is if you are at an auction. There are lots of people 'bidding' for an item (they want to buy for this price). The best price is the 'bid' price.

And if you were at a market with one of those traders who works out of the back of a van and has lots of an item to sell. He does his sales pitch to the crowd and then offers the items at a price. This is the 'offer' or also called the 'ask' (asking) price.

Hopefully you see the difference between he offer and the bid.

The market price, is the prevailing price for the transaction you wish to perform. So in the dollar example above, when you wanted to buy US$ from the bank, you paid the 'market' price of the current rate they wished to sell them to you at - $1.85. When you wanted to sell your remaining US$, when you came home from your trip, you sold at the 'market' rate, which was the rate that the market, in this case the bank, wished to buy them off you for - $1.87 per £1

I hope this makes some sense to you.

By the way, if you use a 'direct access' broker then it gets a little more complicated. But, most 'normal' stock brokers are not direct access. Many of the traders on these boards will use direct access brokers though as they trade frequently.

I hope that you enjoyed your trip to the states

Oh, as far as your question on who get the shares is concerned...

If you wanted to sell an item and there were two people wanting to buy it from you. One was offering more money that the other, who would you sell it to?

If both people offered the same money, then first come, first served.

If you had 1000 of these items and the first person only wanted 500 of them. Then he would get his 500 and the next person who wanted 1000 would get 500.

In the stock market, here would probably be someone else wanting to sell as well, so the buyer would get his next 500 from seller number 2.

ardhill said:

Oh, as far as your question on who get the shares is concerned...

If you wanted to sell an item and there were two people wanting to buy it from you. One was offering more money that the other, who would you sell it to?

If both people offered the same money, then first come, first served.

If you had 1000 of these items and the first person only wanted 500 of them. Then he would get his 500 and the next person who wanted 1000 would get 500.

In the stock market, here would probably be someone else wanting to sell as well, so the buyer would get his next 500 from seller number 2.

Click to expand...

Thanks for all the replies. Now I understand how shares are sold, especially the two prices.

As you mentioned, the "direct broker", could you tell me more about it. I know a broker called "comdirect" is it a direct broker?

Thank you

No, comdirect are not direct access brokers

As for a description...

I though about this for a while and didn't think that I could come up with an easy informative answer that I could write in a reasonably short time. Possibly someone else can sum it up better than I can. So, to make life easier for me and more informative for you, you might want to have a look at the section of Investopedia:
http://www.investopedia.com/university/electronictrading/

This is about trading on line mainly using direct access brokers.

Non-Direct Access brokers only give you level 1 trading access, with direct access, YOU can be an active participant in the market, especially the Nasdaq. You also have more control. (You will understand, what I mean when you read through the information on the link).

I hope this makes things a bit clearer for you.