Why Markets Move: supply, demand, expectations and surprises (education only)

01

What a price is: buyers, sellers and the last trade

In simple words

A price is just the number that a buyer and a seller both said yes to. If you want to sell your bike for $100 and your friend will only pay $80, there is no deal until one of you changes your mind. Markets are millions of people doing this all day.

Key facts

Education only. This lesson explains ideas, not trades.
A market is any place where buyers and sellers meet: a fish market, an online shop, or a stock or currency exchange.
On an exchange, two numbers are shown at the same time:

Word	What it means (FINRA)
Bid	The price a buyer is willing to pay
Ask	The price a seller is willing to accept
Bid-ask spread	The difference between the bid and the ask

The last price you see on a chart is the price of the most recent trade, where a buyer and a seller agreed. It is history, not a promise of the next price.
The spread is a cost. If you bought at the ask and sold right away at the bid, you would lose the spread.
A price moves when buyers become more eager than sellers (price goes up) or sellers become more eager than buyers (price goes down).

WTI oil, first half of 2024. The line ends at the last close, $82.83 on 28 Jun 2024. A chart shows what already happened, not what comes next.

Example (made-up numbers)

A practice stock shows bid $10.00 and ask $10.02. The spread is $0.02. Buying 100 shares at the ask and selling them right away at the bid would cost $2.00 before any fees, even though "the price" did not change.

Step by step

Open any free market quote page or a demo trading app (names can differ by app).
Pick one well-known market, for example a large stock or a major currency pair.
Find the bid and the ask. Write them down.
Subtract the bid from the ask to get the spread.
Refresh the page after one minute and write the new bid and ask.
Check: you should have two sets of numbers and two spreads. If the numbers changed, buyers or sellers changed their minds in that minute.

Watch on YouTube

Market makers and the bid-ask spread in one minuteOne Minute Economics · YouTube · youtube.com

Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.

LESSON 01What a price is: buyers, sellers and the last trade

LESSON 01 / APP DEMO / AI VOICE00:00 / 01:00

Voice

Read the video script

[Host] "What is a price? It's the number a buyer and a seller both agreed to."
[Screen: a quote box showing bid 10.00 and ask 10.02] "On a market screen you see two numbers. The bid is what buyers will pay. The ask is what sellers will accept."
[Text on screen: spread = ask minus bid] "The gap between them is the spread. It's a cost you pay when you trade."
[Screen: a chart line with the last trade highlighted] "The price on a chart is the last trade. It tells you what just happened, not what happens next."
[Host] "Prices move when one side gets more eager than the other. That's the whole game of this course."

Try it now

For three different markets (for example one stock, one currency pair and one commodity), write the bid, the ask and the spread at the same time of day. Which had the smallest spread? Write one sentence on why you think that is. Observation only; no trading.

ClaudeStuck? Copy a ready-made prompt for Claude

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Why Markets Move: supply, demand, expectations and surprises (education only)" on The Future Market. Lesson 1: "What a price is: buyers, sellers and the last trade".

What the lesson teaches:
- Education only. This lesson explains ideas, not trades.
- A market is any place where buyers and sellers meet: a fish market, an online shop, or a stock or currency exchange.
- On an exchange, two numbers are shown at the same time:
- Word - What it means (FINRA)
- Bid - The price a buyer is willing to pay
- Ask - The price a seller is willing to accept
- Bid-ask spread - The difference between the bid and the ask

The exercise I'm working on:
For three different markets (for example one stock, one currency pair and one commodity), write the bid, the ask and the spread at the same time of day. Which had the smallest spread? Write one sentence on why you think that is. Observation only; no trading.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
4. This is for learning only. Remind me to check with a licensed professional before I make a real decision about my own money, health or legal situation.

I'm a parent helping my child (about 8 years old) with a lesson called "What a price is: buyers, sellers and the last trade" from the course "Why Markets Move: supply, demand, expectations and surprises (education only)".

Here's what the lesson says:
A price is just the number that a buyer and a seller both said yes to. If you want to sell your bike for $100 and your friend will only pay $80, there is no deal until one of you changes your mind. Markets are millions of people doing this all day.

The activity:
For three different markets (for example one stock, one currency pair and one commodity), write the bid, the ask and the spread at the same time of day. Which had the smallest spread? Write one sentence on why you think that is. Observation only; no trading.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.
Keep it general and educational. This is not advice for a real situation.

Open Claude

Sources

FINRA, Understanding Market Liquidity and Your Investments (bid, ask, spread): www.finra.org/investors/insights/market-liquidity-risk
U.S. Energy Information Administration, WTI crude oil spot price (DCOILWTICO), via FRED (chart data): fred.stlouisfed.org/series/DCOILWTICO

My notes

I learned this

02