Why prices do not „simply rise or fall“, but are determined by supply, demand and the order book

Many newcomers believe that the share price is „set by the stock exchange“ or „determined by banks“. In reality, the share price is determined by buyer and seller, who place their orders in the order book.

This deep dive explains this as simply as possible - but without distorting reality.

1. 🧱 The share price is created by supply & demand

The course is the price, for which trading last took place.

• If someone buys, the share price rises.
• If someone Sold, the price falls.

But: Not every order moves the price - only those that do executed becomes.

👉 The price is the price of the last transaction.

2. 📘 The order book - the heart of price formation

Each exchange carries a Order book. It contains:

• all buy orders (bids)
• all sell orders (Asks)

Sorted by price.

Buy side (Bid):

„I want to buy, but at this price at most.“

Sales page (Ask):

„I want to sell, but at least at this price.“

👉 The price is created where buyers and sellers meet.

3. 🔍 Bid & Ask - two prices, not one

Many DAUs believe that a share has ein