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The basic answer is “market price”. But what is market price?
Share prices continually fluctuate up and down, as buyers compete to with one another by increasing the price they will pay, and sellers compete with other sellers by reducing the price they will pay. The ‘junction’ at which these two forces meet defines the current price of the share.
We offer a personalised service to ensure you get the best available price for your shares, however if you’ve ever been interested in knowing how it all works continue reading!
When placing an order to buy or sell shares not all orders are created equal, with two different types available:
1) Limit order
A limit order is an order to buy or sell shares at a specified price. The ‘market’ for shares in a particular company is basically just a list of all the limit buy orders and limit sell orders that exist. When the prices of a buy and a sell order match, a trade is executed and shares are exchanged from the seller to the buyer. The pros and cons of a limit order is that that while you may get a better price, it could take some time for your limit order to trade, depending on how far away from the last traded price your limit is.
Here is an example of the market depth for IAG shares. The price column quotes the price per share in cents, while the volume column shows how many shares are available at each specified price. Limit buy orders (called Bids for short) are on the left from highest to lowest price, while limit sell orders (called Asks) are on the right from lowest to highest price.
2) Market order
A market order is traded immediately at the best currently available price, or more precisely a market sell order will trade at the highest bid price, while a market buy order will trade at the lowest available offer price. Using the above example of the market for IAG shares, we can see that a market order to sell our IAG shares would trade at the best bid limit price that someone is willing to buy them from us: 584 cents (or $5.84). If we were to sell more than 28111 shares, then we would have to go down and sell our shares for less at the next limit price level of $5.83.
Above is a snapshot of trades that have taken place in IAG through the interaction of market and limit orders. As you can see it all happens pretty fast, with trades of various sized volumes going through every few seconds. Selling your shares through sellmyshares.com.au means you have a real person to place your trade in the market, ensuring you get the best possible price at the time.