What happens when you press buy

You press buy and a confirmation appears almost instantly. Somewhere between those two moments your order travelled through four or five separate businesses, and what happened in that gap decides the price you actually paid. This piece follows the order the whole way.

The previous piece covered what a share is. This one covers how one changes hands.

The order book, and why a single price is a simplification

The number your app shows as "the price" is the last traded price. It is history. It tells you what somebody paid a moment ago, and it is not an offer to anybody.

What exists right now is a book of intentions. On one side, buyers posting the most they will pay. On the other, sellers posting the least they will accept. The highest buy order is the bid. The lowest sell order is the ask, sometimes called the offer. The gap between them is the spread.

Nothing trades inside that gap. A trade happens when somebody agrees to cross it, either by lifting the ask or by hitting the bid. So when you buy at market, you are not paying "the price". You are paying the ask, and the ask is always higher than the bid.

That gap is the first cost of trading and the one most people never see. On a heavily traded large company it might be a single cent on a hundred dollar share, which is nothing. On a thinly traded small company it can be several percent, and you pay it on the way in and again on the way out.

Depth matters as much as the spread

Behind the best bid and ask sits everything else, stacked by price. Maybe there are four hundred shares available at the ask, then another eight hundred a cent higher, then two thousand a cent above that.

If you buy five hundred shares at market, you take the four hundred at the ask and the rest comes from the next level up. Your average fill is worse than the price you saw. That is slippage, and it grows with order size and shrinks with liquidity.

The route your order takes

Pressing buy sends an instruction to your broker. The broker does not usually own the shares and does not sell them to you. The broker is an agent whose job is to get the order executed somewhere.

Where it goes next depends on the broker. Some send orders straight to an exchange. Many route them to a wholesale market maker, a firm that executes retail orders in bulk and pays the broker for the flow. Others use an alternative venue where large orders are matched away from public view.

Whichever route it takes, the firm handling your order in the United States has a duty of best execution: it must seek the most favourable terms reasonably available, which is not the same as guaranteeing the best possible price on every single trade. In practice retail orders in liquid names often fill slightly better than the posted ask, because market makers compete for that flow.

Your broker publishes how it routes orders and what it is paid for them. That disclosure is required and it is public. Reading it once for your own broker is worth more than any opinion about payment for order flow you will read online.

Filled, partially filled, or not at all

Three things can happen after the order leaves.

• Filled. The whole quantity traded. You own the shares.
• Partially filled. Some traded and the rest is still working, or was cancelled. Common on larger orders in thinner names.
• Unfilled. Nothing traded. Normal for an order with a price condition the market never met.

A market order is designed to fill and accepts whatever price that takes. An order with a price limit is designed to protect the price and accepts that it might not fill. You cannot have both, and choosing between them is the subject of the next piece.

Who is on the other side of your trade

Somebody sold you those shares. It is worth knowing who that usually is, because the honest answer removes a lot of mystique.

Most of the time it is a market maker: a firm whose business is quoting both a bid and an ask continuously and earning the spread between them. It has no view on whether the company is a good investment. It wants to buy at the bid, sell at the ask, and end the day roughly flat, thousands of times over.

Sometimes it is another trader whose resting order you crossed. Sometimes it is an index fund rebalancing, a pension fund raising cash, or an employee selling shares they were granted. Very rarely is it somebody who has concluded the company is doomed.

This matters because of a thought that occurs to almost every new trader: if somebody is selling, do they know something I do not? Usually they do not. They have a different job, a different timeframe, or a different reason for needing cash today. A trade is two people with different purposes, not one person outsmarting another.

The quote you see may not be the whole market

Your app shows a price. Which price depends on what data your broker pays for, and the difference is larger than most people assume.

The cheapest feed is a consolidated summary showing the best bid and ask across exchanges, with no view of the depth behind them. Fuller feeds show the book at each venue, level by level. A free app usually shows the summary, which is why you can see the ask and still be surprised by your fill: the summary told you the best price, not how much was available there.

There is also a small delay on some free data. Not enough to matter for a position held for weeks, and quite enough to matter if you are reacting to a fast move.

Knowing which of these you have is worth thirty seconds in your broker settings. Plenty of people trade for years believing they are watching the market when they are watching a summary of it on a short delay.

Settlement, or when the shares are really yours

The trade is agreed instantly. The transfer of shares and money finishes later, on a schedule called the settlement cycle. Since May 2024 the United States settles most stock trades one business day after the trade, which the industry writes as T plus 1.

For most people this is invisible. It matters in two situations. If you are trading in a cash account, the proceeds of a sale are not fully available until settlement, and spending unsettled cash repeatedly can trigger restrictions. And dividend eligibility is decided by the record date, which the settlement cycle feeds into.

The costs, including the ones with no line item

Commission is the obvious one, and at many brokers it is now zero on US stocks. Zero commission does not mean zero cost.

The spread is a cost. You buy at the ask and could only sell immediately at the bid, so a round trip starts underwater by the width of the spread. Slippage is a cost on anything large enough to eat through a price level. There are small regulatory fees on sales. And if you trade outside regular hours, spreads are typically wider and depth is thinner, which makes both of the first two worse.

None of this makes trading unworkable. It makes small, frequent trades in illiquid names expensive in a way the app does not show you, which is worth knowing before you develop a habit.

Price improvement, and why fills are sometimes better than the ask

A wholesale market maker executing retail orders competes for that business, and one way it competes is by filling orders slightly inside the quoted spread. If the bid is 47.98 and the ask is 48.02, a buy might fill at 48.00. That is price improvement, and on retail sized orders in liquid names it is common.

Brokers publish statistics on it: the share of orders improved, and the average improvement per share. Those numbers are the practical answer to arguments about order routing. Rather than reasoning about incentives in the abstract, you can read what your own broker actually achieved.

The improvement is small per share and it is real. It is also the reason a retail order in a large company often costs less than the posted spread suggests, while an order in a thin company costs more than it suggests.

Fractional shares and odd lots

Most apps now let you buy a fraction of a share, or a whole number that is not a round hundred. Both behave differently from a standard trade and it is worth knowing how.

A round lot is one hundred shares, and the quotes you see are generally for round lots. An order for seventeen shares is an odd lot, and odd lots historically did not appear in the public quote at all. They fill perfectly well, but the quoted best bid and ask are not strictly a promise about them.

Fractional shares go further. The exchange does not trade a third of a share, so your broker handles the fraction internally: it trades whole shares on the market and allocates you a slice on its own books. That has consequences worth knowing. Fractional positions usually cannot be transferred to another broker and are sold instead, the execution is at the broker's discretion rather than your own order sitting in a public book, and some brokers batch fractional orders rather than sending them immediately.

None of that makes fractional investing a bad idea. It makes it a different mechanism from the one this article has described, and one where the broker's own terms matter more than the exchange's.

Trading outside regular hours

US regular hours run from 9:30 to 16:00 Eastern. Sessions exist before and after that, and they are a different environment rather than a longer version of the same one.

Volume is a fraction of the regular session. Spreads are wider, often dramatically so. Depth is thin, so a modest order moves the price further. Many brokers accept only limit orders outside regular hours, which is a sensible restriction rather than an inconvenience.

The prices printed in those sessions are real trades, and they can be a poor guide to where the stock opens. A company that reports after the close can trade up sharply on low volume in the evening and open somewhere else entirely, once the full market has had its say.

Why your fill can differ from a friend's

Two people can press buy on the same company within the same second and get different prices. The book moved between the two orders. They routed differently. One order was larger and reached deeper into the book. All three happen constantly and none of them means anything went wrong.

This is also why a screenshot of an entry price proves very little on its own. Fills vary. A trading idea is worth judging on its reasoning and its structure, not on whether somebody got a good tick.

How the Den uses this

Alerts in the rooms carry an entry range rather than a single price, and the reason is everything above. A single number would be unfillable for most of the people reading it by the time they read it. A range says where the idea is valid and where it is not, which survives the book moving.

The same thinking runs through the stop. A stop is placed where the reasoning breaks, at a structural level, rather than at a round number that happens to sit nearby. A level chosen for structure still means something when the spread widens.

When you read an alert and the fill you can get is outside the stated range, the honest answer is usually to let it go. The idea was defined by that range. Chasing it past the edge is a different trade with worse odds, taken because the first one was missed.

That habit, leaving a trade alone once the conditions no longer hold, is worth more than any entry technique. It is also easier to learn in a room where other people are saying out loud that they are skipping one.