Can someone tell me about the working of a stock market and what determines the price of any stock at any time

Question

is the live stock price its last traded price only...

Answer 1

The price is primarily determined by the buying public.  It reflects what people are willing to pay to own this company at any given time.  The live stock price generally reflects the most recent transaction, although on heavy trading days the price can lag by several minutes.

Answer 2

Supply and demand.  If there is an increased demand for a company's stock i.e. more people are buying, as a result the supply of common stock decreases increasing the price of the stock.  The inverse is true when there is a decreased demand in a stock and investors sell.  There is an increased supply of common stock which decreases the overall price of the stock.

Answer 3

Lets take an very simplistic view of the way the market works. If we say that there are 100 buyers each wanting to buy one stock each in ABC Corp. The price is $10 a share. There are no sellers at this price. The sellers are holding out for a higher price out of greed. In this scenario, the price goes up until sellers are encouraged to sell at higher prices.  Perhaps the price goes up to $11 and 5 buyers get to buy the stock, driven by fear that the stock may go higher before they can buy, as 5 sellers have considered that this is a good price to sell at. But there is still buying out there, even at $11, but all sellers who are willing to sell at that price have sold. So the stock moves up to $12, and 10 buyers buy from sellers who decide to sell at that price. Buying power still remains and the price moves up to $13.  At this price, 30 sellers agree to sell, locking in profits, which still leaves 55 sellers.

The price rises to $14 and suddenly 300 sellers offer to sell, but there are only 55 buyers. At this point, the buyers, driven by greed, if they are smart, sit tight and wait for the price to go back down as some sellers panic and sell for less than $14 in order to offload the stock fast, driven by fear. The remaining 55 buyers get to buy as the price goes from $14 to $13.50. There are no other buyers at this price and so the price falls to $13 to try to attract buying interest. The volume has changed from buying volume to selling volume.  

This is a very simplistic way to look at the market, but it highlights the price discovery mechanism that is at work in all markets as a relationship between buyers and sellers. Importantly, it highlights when conditions change from sellers having the upper hand to when buyers have the upper hand.