Lesson 6 of 31 · Zero to reading a chart

What a Broker Does: You Can't Walk Into an Exchange

A broker carries your order to the exchange, where it is matched with a stranger's opposite order - every trade is one buy meeting one sell, and nobody buys from the company.

You have decided to buy a share. So where do you go?

Not to the exchange. You cannot walk in. And not to the company either. They are not selling.

Last time you saw where a price comes from. Two people agreeing, and the match between them.

Today: how you become one of those two people.

Between you and the exchange there is a middle. It is called a broker. These days it is an app on your phone, or a website.

Underneath, it is a firm licensed to carry your instructions to the exchange.

The instruction has a name too. It is called an order.

A buy order says: I want this many shares of this company. A sell order says: I want to give up this many shares.

So here is the whole chain. You tap buy. Your broker sends the order to the exchange. The exchange looks for somebody with the opposite order. Somebody selling what you want to buy.

It matches you. That match is one trade. It lands inside one of the bars you saw last time.

Look at who you just traded with. Not the company. A stranger. Somebody who owned that share before you. They decided they would rather have the money.

You will never know who they were. They will never know who you were.

Every single trade on that chart is two strangers. One of whom wanted out.

Here is that real day again. Every bar holds trades. Each one is somebody's buy order meeting somebody's sell order. Hundreds of them. Thousands of them.

One more thing, and then we leave it. There is more than one way to write an order. You can say: buy it at whatever the price is right now. Or: buy it only if it reaches this price. Those are different instructions, and they behave very differently.

We come back to that properly later. It needs the two prices, and you have not met those yet.

A broker carries your order to the exchange. Every trade is one buy order meeting one sell order.

Nobody buys from the company.

Here is the mistake. Beginners think buying a share sends money to the company. That they are helping it. Almost never.

Unless the company is selling new shares that day, it never saw your money.

Your money went to another person who was selling. The company was not involved at all.

Here is a question to carry with you. When you buy, somebody is selling to you. Who? And why now?

Check yourself

Who are you actually buying from?

A stranger who already owned it.

What does a broker do?

Sends your order to the exchange.

What is one trade on the chart?

One buy order meeting one sell order.

Next lesson: A chart is just dots.

For learning only. Not financial advice, not signals, not stock picks.