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Comment by colejohnson66 | Hacker News Reader

I thought the price was what someone was a rough idea of what people are willing to pay for it. So if it’s $0.00, why would you ever pay more than that? And if no one buys it for a penny or more, it’s “price” won’t go up.

In case it’s not clear: I only know the price is what I pay for it. I don’t fully understand where it comes from.

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My understanding is that for each tradable asset, there are two prices: Bids and asks; and trades will only happen when asks and bids exist at the same price point.

Most prices we see on tickers are the lowest asks, I believe.

Most commonly, price you see on ticker quotes is the price the stock last traded at; i.e., the last price at which a buyer and seller exchange money for equity.

Oh, right. That makes sense. Hence it's that magical point where an ask equals a bid, and thus: trade!

So doesn't that essentially mean that at the point of measurement—that is, a trade occurring—the price is both lowest ask and highest bid?

Yes, a trade represents an instant in time when a potential buyer and a potential seller agree on a price. The highest bid matches the lowest ask, and then the exchange "matching engine" generates a trade from them.

Instantaneously afterward, the highest remaining bid will be below the lowest ask.

When anyone talks about "the price" of a stock it is an approximation of some sort. Probably they mean the last traded price; maybe the midpoint (bid+ask)/2; maybe the symbol is in the middle of an auction and they mean the auction clearing price.

There's an order book listing buy and sell orders at a variety of prices clustered around big/ask, but the actual bid/ask numbers shown are a standardized summary view of the order book

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