The diagram below shows how ๐๐๐ฆ๐๐ง๐ ๐๐ง๐ ๐ฌ๐ฎ๐ฉ๐ฉ๐ฅ๐ฒ make the prices go up or down, using Metaโs stock as an example.
All the buy/sell orders are placed into a ๐๐๐๐ (Centralized Limited Order Book). Green ones are buy orders, and red ones are sell orders.
At each price level, there are several orders queued up in sequence. For example, at price level 95.30, there are two orders โ 200 shares and 100 shares.
There are different order types for investors. For example:
โถ๏ธ Market order doesnโt specify the price, and matches order from best bid/offer levels.
โถ๏ธ Limit order specifies a limit price, and is placed into the order book at a certain price level.
๐ก What happens when one buyer wants to ๐๐ฎ๐ฒ 1100 ๐ฌ๐ก๐๐ซ๐๐ฌ with market order?
This big order matches 5 orders in the sell book:
โถ๏ธ 200 shares and 100 shares at price 95.30
โถ๏ธ 100 shares, 500 shares and 200 shares at price 95.40
Now the price level 95.30 ๐๐ข๐ฌ๐๐ฉ๐ฉ๐๐๐ซ๐ฌ, and the best ask price ๐ฆ๐จ๐ฏ๐๐ฌ ๐ฎ๐ฉ one level to 95.40.
So if the market is bullish on the stock, there are many buy orders to take orders from the sell book, and the stock price will continue to go up; but if the market is bearish on the stock, people sell the stocks in panic, the stock price will continue to go down. The latter is what happens when Meta released its financials.
