Stock volume confusion..?

Question

When there are more sellers, the price goes down and when there are more buyers the price goes up. Thats straight forward. But then for every seller there has to be a buyer right? So if thats true (number of buyers = number of sellers), then how does the price go up and down by selling/buying?

Answer 1

Because there aren't more sellers than buyers.

If there are more buyers than sellers AT A CERTAIN PRICE, then the market will run out of sellers AT THAT PRICE and the unsatisfied buyers will have to raise their offer price to interest more sellers.

Same thing happens in reverse when the market goes down.

Answer 2

The volume of buyers and sellers is not the only factor that raises the price of stocks.  You are also talking about demand right.  The economy of the country is no. 1 price indicator.  There are more factors and you can find that out by going to different brokers site.  They have a tutorial on stock trading.

You may wanna check this out too.  May help some.

http://www.investmentpaysoff.com

Answer 3

No true.  Think about it this way.  If there were 20 people selling apples and only one buying, then the 19 people that didn't sell an apple would lower the price to attract more buyers - there isn't a one-to-one of buyers to sellers.  The price will keep dropping until the other 19 sellers have sold their apples.  Now if 100 people step up to buy apples, the bid price goes up for the 20 people selling apples.

Answer 4

Keying on the volume issue in your question, I'll try to keep close to it in the discussion.

Suppose I was some fat cat (would that I were) with a pile of stock in a company that you were interested in.

You hear some news, XYZ has a new product perhaps, so you want some. Others have read the same news and came to the same conclusion. At this point there are scads of people interested in a company that few were paying much attention to until then.

The volume of orders to buy come flocking in. The amount of stock hasn't changed, just the interest of people buying it has. So some are willing to pay a premium price (as in a higher price) in order to get some who own the stock (like me) to part with a few shares.

Meanwhile I've been sitting on this stock for a long time, my position is likely to be well "in the money" as options traders might say. So, I feed out a little, doling it out a few hundred at a time. The price continues to rise, so I shell out a few thousand now.  Other similar folk have begun to do the same as the price rises.

Meanwhile it starts to get too rich in price for folks and since we fat cats are now being more generous at helping to fill the orders, the rise in price slows.

Now we wait.

The pendulum swings to the other side. The top has been realized. Exhuberance meets reality, and some are thinking, "It may have risen too much, maybe I need to get back out." (not all will be able to do this). The price falls.

We continue to wait.

Over the next couple of days, the trading appearance, a stock falling in price, and people have forgotten about the new product or new plant or whatever drove them originally, but see the price coming down. Some panic, "Sell at any price!" The volume rises as the stocks fall in superficial value.

We begin, slowly, to start buying back what we sold.

Now all of those flakey folks who bought for the wrong or similarly irrational reasons are shoving all those shares back, but the price slows, the cats are feasting more cheaply on these want-to-be abandoned shares.

I've only a few times had the opportunity to do something like this. Buying a stock for $5, then a month later something big hits the news and it climbs. Then I sold it for $6.50. The next day it fell, and the next, and the next, and the next. Then, the day after the sale cleared and the money became mine, I bought the formerly $6.50  stock back for $4. A month later it more slowly rose to $5, then a month later to $6, where I sold again.  Sudden volume spike was what made me part with something I intended to hold for several months. When the enthusiasm waned, it was the slowing of volume at the bottom of the retreat that said it was safe to get back in. Then my originial reasons for being in the stock were eventually realized.

That is how you can use volume sometimes.

Answer 5

You're missing 2 Key things: The Price Variable, and the words 'Willing to'

So: 'When there are More Sellers than Buyers the price goes down'

should read as

'When There are more Sellers WILLING TO Sell at $50 then Buyers Willing To Buy at $50, the price will decline'

A stock has a Bid/Ask on it, The highest someone is willing to pay and lowest someone is willing to sell for.

When the two touch, a trade occurs.

So a Quote for a stock looks like this:

YHOO - Last 24.64, Bid 24.63, Ask 24.64

Meaning someone's willing to pay 24.63 for it and someone's willing to sell it for 24.64.

If someone came along and was willing to Sell a lot for 24.60, They'd first sell to anyone buying at 24.63, then 24.62, then 24.61 and 24.60.

If someone came and wanted to buy a lot and were willing to pay up to 24.75, they first buy for 24.64, then 24.65 etc...

So Buyers and Sellers are always there, Every trade has a buyer and seller...but Potential Buyers and Sellers are always sitting there. So when someone decides to buy some or sell some, they move the market because they consume the buyers or sellers in the opposite direction they're going.

If you need 50 bottles of water, and 3 stores are selling 20 bottles only at $1.00, $1.25 and $1.50...then the price to buy 1 bottle is $1.00.

But if you buy 50...you buy out the $1.00 store, you buy out the $1.25 store and half the $1.50 store.

Now what's the price of water? $1.50

Your Demand has exhausted the supply, raising the price.

Think of it the opposite way too, You're a ticket scalper. You have 10 tickets to a Hockey game and there's many potential buyers. you first set a price of $100 and find 3 buyers, then the highest anyone is willing to offer is $90 and you sell two more, then 2 more at $80. And finally with those big spenders gone, highest anyone will offer is $60 and you sell the last 3.

You've mover the market again. Your Supply has satisfied demand, lowering the price.

Answer 6

That's not quite right.

The number of sellers doesn't have to match the number of buyers, although the number of sold shares does usually match the number of bought shares (aside from the IPO and related types of issues).

But the share price is the clearing price, where the strength of demand (on behalf of buyers) meets the strength of supply (on behalf of sellers).

Think of it this way -- for stock shares, there is probably always a price at which nearly everybody would want to sell, and a price at which nearly everybody would want to buy.   Holding GM for $9999? Sell! Offered Google for $0.01? Buy!

But as the price goes up, fewer people want to buy and more want to sell, and vice-versa as the price goes down.

In a free market system, the price arrived at is the intersection of the supply curve (the potential sellers) and the demand curve (the potential buyers).  What that price is, varies from day to day (or minute to minute) based on what the entire body of potential sellers and buyers think of the future prospects of the stock.

Answer 7

It is like an auction.

The buyer makes a bid, when someone accepts that bid, it sells for that price.

Sellers offer stock for a price, if someone says they will pay that price, it sells for that price.

If the sellers ask for too much, it will not sell.

If the buyers don't offer enough, it will not sell.

Now if a buyers offers to buy at the market price, the next seller in line sells.

If the seller offers to sell at the market price, the next buyer in line gets it.

Answer 8

The correlation is not equal.

Shares can drop or rise on low volume or high volume.

Say a company has 10 million shares outstanding and is worth $30 on a Friday close.  Bad news comes out and it opens at $2 on Monday.  Shares were not traded in tandem to get to that price.  That is simply what the market was offering on that day compared to the Friday before.  That is how market caps get wiped out or grow in an instant.

Take a look at trading patterns in stocks.  Many of them are "played" by professionals.  They move the price of the stock in small transactions to get the price to where they want it.  They play the part of the "buyer and the seller" that you mentioned.  With smaller amounts (anywhere from 1 to 10 shares) they can control the movement of the stock.

Good luck!