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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?

  • So anyone with computerized trading can manipulate stock prices the way they want? There should be certain volume of that particular stock to move the stock price. – user17451 Jun 10 '14 at 15:05
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In a sense, yes. There's a view in Yahoo Finance that looks like this

enter image description here

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.

  • Excellent post -- pointing out that just because the price goes up -- just means the offer has gone up -- doesn't mean you can sell at the higher price. – dcaswell Sep 22 '13 at 23:34
  • Thanks for the reply. Once the person purchases the 3000 shares and puts the last stock price at 1.34, wouldn't this cause the bid to increase as well? – Jon Sep 24 '13 at 2:50
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    The next seller will see the $1.34 trade, yet that Bid $1.25 is still sitting there, so he'll be disappointed. The bids only rise if a new buyer comes in and offers a higher price. The bids don't just rise because the ask is higher. – JTP - Apologise to Monica Sep 24 '13 at 3:43

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