Over the summer on days with very low volume, there were substantial movement in the stock markets.
Why is this? Is it because there aren't enough market forces in check to really give a correct price? Does it allow one side (buyers or sellers) to get a stronger hold on the stock price?
In a sense, yes. There's a view in Yahoo Finance that looks like this
For this particular stock, a market order for 3000 shares (not even $4000, this is a reasonably small figure) will move the stock past $1.34, more than a 3% move.
Say, on the Ask side there are 100,000 shares, all with $10 ask. It would take a lot of orders to purchase all these shares, so for a while, the price may stay right at $10, or a bit lower if there are those willing to sell lower.
But, say that side showed $10 1000, $10.25 500, $10.50 1000. Now, the volume is so low that if I decided I wanted shares at any price, my order, a market order will actually drive the market price right up to $10.50 if I buy 2500 shares "market".
You see, however, even though I'm a small trader, I drove the price up. But now that the price is $10.50 when I go to sell all 2500 at $10.50, there are no bids to pay that much, so the price the next trade will occur at isn't known yet. There may be bids at $10, with asking (me) at $10.50. No trades will happen until a seller takes the $10 bid or other buyers and sellers come in.
