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In very easy: If more people buy a stock, it climbs. If more people sell a stock, it falls.

But how can that be if there must be someone buying all the stocks that are sold? Are the stocks sold back to the company?

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    One person can sell fractions of their holding to multiple people. It's the number of shares transacted that has to balance, not the number of market participants. Price is also determined by what two people agree to pay, not by volume.
    – chepner
    May 27 '21 at 14:02
  • If you want to sell a stock, and there's nobody buying it, not even bots or arbitragers, no matter how low you set the price, then the stock "buy price" is, nearly by definition, at the lowest possible value for the exchange. May 27 '21 at 21:43

10 Answers 10

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If more people WANT TO buy a stock, it climbs. If more people WANT TO sell a stock, it falls.

That is the correct statement.

But how can that be if there must be someone buying all the stocks that are sold? Are the stocks sold back to the company?

The stock market is an auction. If there are people who are motivated enough to spend what it takes to buy shares of a stock, then they'll bid enough that owners will eventually find a price at which they are willing to sell.

But... just like at any auction, not everyone gets to buy shares, because at some point the price rises beyond what they are willing to pay.

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    Media outlets like CNBC often confuse things by using terms like "market sell-off" which is entirely inaccurate because the exact same number of shares sold, was also bought.
    – Alex R
    May 28 '21 at 6:25
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    @AlexR it's not an inaccurate expression, because when "more people WANT TO sell a stock, it's price falls." If you're highly motivated to sell, you'll lower the price at which you're willing to sell.
    – RonJohn
    May 28 '21 at 12:42
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In terms of transactions, the buy and sell numbers must obviously be equal. We could quibble about numbers of shares vs numbers of people, but that’s not the point.

What is more relevant is the volume of intent. If more seek to sell than seek to buy, then in theory, once all buyers have done their business, sellers would likely lower their selling prices to entice more buyers into the market. Vice versa if there are more looking to buy.

It’s more nuanced than that, but the main point is that the words “buyers” and “sellers” are often used loosely, and can refer to those involved in transactions or those looking to transact.

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    Even with available buyers, a seller could lower their asking price so that a buyer buys from them, not another seller.
    – chepner
    May 27 '21 at 13:49
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Another consideration, that complements the existing answers, is the role of Market Makers. These are companies that have agreements with the stock exchanges to always provide a "bid" and "ask" price for certain stocks, and so ensure the liquidity of the market.

Their bid price will always be below the "current" price (= the price at which stock most recently changed hands) and their ask price will always be above the "current" price.

Their presence ensures that anyone that really wants to sell or buy (i.e. is "motivated enough", as RonJohn puts it) can do so (and, in doing so, will lower or raise the "current" price accordingly).

However, in a sense, the market makers themselves don't actively want to buy or sell. They will happily do so if someone meets their price (not least because they make money on the bid-ask spread), but the "driving force" of such transactions is the other party.

Are the stocks sold back to the company?

Some companies will occasionally perform a buy-back or share repurchase as an alternative way (to dividends) of returning money to investors, but these events are not part-and-parcel of the daily buying and selling of stock on exchanges.

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    Glad that you mentioned buy backs. In addition, the company may (occasionally) issue more shares. In either case, there is only the company on one side of the transaction, and any number of investors on the other side. One does not need to equal many.
    – DrSheldon
    May 27 '21 at 16:43
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    The current bid and ask prices don't need to surround the previous transaction price!
    – Nayuki
    May 28 '21 at 19:29
  • @Nayuki You are, of course correct. I'll edit when near a keyboard.
    – TripeHound
    May 28 '21 at 19:52
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People rarely in general want to just plain buy a stock (certain examples like Tesla and Gamestop aside.) They want to buy a stock at or below a particular price. Same with selling. A few people just want to sell no matter what, but mostly the issue is wanting to sell at a particular price.

When the price is X, if more people want to buy at X than sell at X, the price rises from X. Some people get to buy at a price they really really like; as it rises less people want to buy at the new price (and more want to sell) until it reaches a balance and stops rising.

When the price is Y, if more people want to sell at Y than buy at Y, the price falls from Y. Some people get to sell at a price they really really like; as it falls less people want to sell at the new price (and more want to buy) until it reaches a balance and stops falling.

The actual values of "less" and "more" vary and that is what controls the steepness of the rises and the falls, and how long they last for. Plus things happen in the world that change people's minds. I might have been unwilling to sell at X, the price might rise to X+10, but then because of something in my life making me need the money, or something in the world changing what I think the stock will do in the next little while, I might suddenly be willing to sell at X-10 and be really happy with X+10 if it's still possible. In some cases the "something in the world" is in fact the movement of the price: people see it going down and decide to sell while they still can, which means it will continue to fall, or people see it going up and want to get in on the ground floor; their buying pressure will continue to drive it up.

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The number of people buying or selling is irrelevant. IOW, ten people trying to buy 100 shares at "X" has the same effect as one person trying to buy 1,000 shares at "X".

For every transaction, there is a buyer of those shares and a seller of those shares. Their volume is equal and offsetting. So how does price change?

Throughout the day, if a similar amount of buying and selling volume comes in at current price, there is equilibrium and price goes nowhere. If an excess of one comes in, price changes.

For example, every time a buyer takes out a seller, if no new sellers come in at current price, price will move up to the next ask price on the order book. If additional buying takes out that ask price and new sellers don't come in at that price, then the ask price moves up again. This either entices new buyers to come in at a higher bid price or the market maker raises the bid, assuming that he is the market. The longer this continues, the higher share price will go. When the excess buying volume is resolved, equilibrium is restored and price levels out.

It's not the number of buyers and sellers but it's the net aggregate buying volume over selling volume (or vice versa) that moves price.

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@NotTheGuy explains how it actually works. You might have a stock with hundreds of limit orders out there to buy and sell at defined prices. But orders don't always have to be completed in total. Take this example for an imaginary stock FAKE. These are orders that are out there waiting to be filled:

  • ...
  • FAKE Sell 100 shares at $53.00
  • FAKE Sell 25 shares at $52.95
  • FAKE Sell 50 shares at $52.95
  • FAKE Sell 1000 shares at $52.90
  • FAKE Buy 100 shares at $52.85
  • FAKE Buy 200 shares at $52.80
  • FAKE Buy 37 shares at $52.75
  • ...

The price listed on the market is actually the price of the last sale of the stock. It is most likely $52.85 to $52.90, let's say the last sale was at $52.85. Now Alice comes in an wants to get 100 shares of the stock.

If she enters the price of $52.85 then she won't immediately get the the stock. She will be added to the order book along with the existing order to buy at $52.85 until someone wishes to sell at that price. But she could enter a market order to buy at whatever price people are selling for. If she does that, the transaction will go through with the person selling shares at $52.90. She will get 100 of the shares, and the remaining 900 shares will remain in the order book. Since the last transaction happened at $52.90, this is when the price you see on websites changes, since it is the price of the last transaction.

Now Bob can come in with another market order to buy 500 shares, that will go through at $52.90 and now that sell order will have 400 shares remaining.

Note: This is a simplification, there are other types of orders that I think are outside the scope of this question but bear considering. If the seller at $52.90 was an All Or None then Alice and Bob would have bought shares at $52.95 and $53 and the 1000 share sell would not happen u ntil someone wanted to buy all 1000 shares. There are also stop orders to protect your profits or prevent losses. For instance you may have bought a stock at $1000 and now it is at $2000. You could put in a stop sell order at $1500. If the price drops below $1500 it is converted to a market order. You could do this because you want to keep the stock and think it will go up, but you want to ensure you make money on it in case it drops. So if it ever falls below $1500 you want to get out and keep your profits.

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  • Thank you for explaining the order book aspect of stock trades. All too often it is oversimplified as an auction process which leads to confusions that lead to these type of questions.
    – psaxton
    May 27 '21 at 19:23
  • Things like stop orders are subservient to the order-book model. If nobody has any limit orders pending for any price between $50 and $150, and someone has a stop loss order at $149, then if the number of people wanting to sell for $149 or more exceeds the number wanting to buy at $149 or less, the stop-loss order will result in the stock selling for $50.
    – supercat
    May 29 '21 at 5:01
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There may be some validity to thinking of it in terms of how many people want to buy and sell, but it probably makes more sense to consider how orders are matched.

On the low side you're going to have all the buy orders, each with the associated price the person wants to buy shares for (and the amount of shares they want to buy). On the high side you're going to have all the sell orders each with their associated price and amount. These are "limit orders" in the order book.

If someone places a limit buy/sell order (trade only if the price is below/above some limit) with a price not compatible with existing sell/buy orders (no orders below/above that limit), so it can't get matched immediately, the order will get added to the order book.

If the order can get matched, or someone places a market order (trade for the best current price), then this order will get matched sequentially with the lowest sell order or the highest buy order (depending on whether the new order is a buy or sell order) until the new order is fulfilled.

The "current price" of a stock can be thought of as either being between the highest buy order and the lowest sell order or equal to the price of the last processed trade.


The price of a stock generally increases when people place orders to buy immediately, as this consumes the cheapest sell orders in the order book. This increases the size of the gap between buy and sell orders. Then there are usually people placing buy and sell orders to fill in the gap, which can make it settle at a slightly higher price (because there were only sell orders at those prices before, but now there can be buy orders too).

Selling is the same in the opposite direction.

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  • Nice answer, but I think "current price" you see is actually the price of the last transaction that actually occurred. May 27 '21 at 15:42
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For less well known stocks there are large periods of time where no one is buying a stock.

Low volume stocks can go several minutes at a stretch with no buyers and therefore no sellers.

Said another way, no buyer was willing to pay an outstanding offer price, and no seller was willing to sell to an outstanding bid price.

The "price" is the last price someone paid for the stock. But in many cases that price is several minutes old.

For more well known stocks the last price is usually less than a second old.

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Trying my hand at a layman's explanation:

It's not about how much is sold, because you are correct that the global amount of sold stocks is always equal to the global amount of bought stocks. It's about how much the difference between supply and demand is, i.e. the desire of both the seller and the buyer.

I come from a country that has a very large potato farming industry. Every store has shelves chock full of potatoes. I have never come across any store that didn't have an ample supply of potatoes.

Therefore, people are not willing to pay much for potatoes. Any store that increases its asking price will see that its customers can trivially find another store with better prices, since every store has plenty of potatoes. Therefore the price is low.

But my country only imports a limited supply of graphics cards. The demand for these cards is so high that you hardly ever find a store that has them available. The moment they're in stock, people swarm the shop and buy the entire stock within minutes. I hardly ever come across a store that has these graphics cards in stock.

Therefore, people are on the lookout for these graphics cards. Stores know this, and they feel confident upping the price, because they know that the customer isn't easily going to find another store with available graphics cards, and therefore the price of graphics cards is higher.

  • The sell price in shop A is directly influenced by how many other shops sell the same product, because in reality the shops are competing with one another to be the chosen point of sale.
  • How much a customer is willing to pay is directly influenced by how much other customers are willing to pay, because in reality the customers are competing with one another to be the one to get their hands on a graphics card.

Depending on the balance between supply and demand, the market puts more pressure on one of these listed bullet points. This is why we have terms for "buyer's market" and "seller's market". When the pressure is on the seller, this benefits the buyer, therefore it's a "buyer's market". And vice versa.

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This is just the really a typical securities market exchange works.

There are market makers and market takers. Market makers place the existing orders to buy/sell the security at a price of their choosing. The market taker, takes the lowest/highest price on the buy/sell side.

So the outstanding volume of open constracts (usually limit orders they are called) doesn't really matter as it does not reflect real exchange of security being bought or sold. It's not till a market order comes in to buy/sell that limit order, then it actually means the security was traded for a certain price.

So we see the volume of market orders coming in to buy or sell are really the living exchange, that moves things. There is no reason to expect volume buying vs volume selling over any time period will be equal. Both will drive wider in their respective direction, against market makers at those prices.

So really you don't have a securities price as a single price. You have a buy price and a selling price. And each are determined by the volume of market makers vs takers. And the price as the average between the buy and sell price doesn't even have to move. There can persist a gap between the two prices too. Other times they can be equal or just with in one denomination of each other.

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