suppose one company has 1M share, 100K Sold out,900K left and the current price of each stock is $5. so if i buy another 100K what will be the stock price . assume that no one selling .
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4If "no one is selling" then you won't be able to buy any shares. Are you referring to an "Initial Public Offering", where a company issues shares for sale to investors?– not-nickCommented Aug 24, 2016 at 17:45
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hi @Nick R ! just assume that someone just sell the 900K shares ! somehow 900K share is free to buy .– Anirban BhuiCommented Aug 24, 2016 at 18:18
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If "no one" is selling, where are you buying the 100k shares from? What price are they asking? The price of the last sale is your answer. It's determined by the last seller's offer.– user662852Commented Aug 24, 2016 at 22:39
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1Pay particular attention to the second answer to that question. You appear to be under the impression that most shares are bought directly from the company - they are not. Shares are bought from other people who previously bought them. The market price is simply the last price where 1 person who owned shares wanted to sell, and 1 person who wanted shares, agreed to buy.– Grade 'Eh' BaconCommented Aug 25, 2016 at 18:04
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3 Answers
There isn't a formula like that, there is only the greed of other market participants, and you can try to predict how greedy those participants will be.
If someone decided to place a sell order of 100,000 shares at $5, then you can buy an additional 100,000 shares at $5.
In reality, people can infer that they might be the only ones trying to sell 100,000 shares right then, and raise the price so that they make more money. They will raise their sell order to $5.01, $5.02 or as high as they want, until people stop trying to buy their shares.
It is just a non-stop auction, just like on ebay.
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thanks for the replay . i understand it but i want to know the greedy effect for price movement Commented Aug 24, 2016 at 18:41
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1@AnirbanBhui there is no formula for that. Let's say you are the sole seller in the previous scenario and you have the privilege of raising the prices, how high will YOU raise those prices above $5? Depends on how greedy you are? Depends on what time of the year it is, because you want to buy new electronics or a vacation with the profits? No math formula is capable of reading your mind. If you raise the price too high, you will be waiting too long to sell the shares and instead will lower them hoping someone will buy, converting your shares to dollars, cont:– CQMCommented Aug 24, 2016 at 21:40
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1@AnirbanBhui How would somebody else predict what influences your greed? There isn't a formula per say, people do try to predict these things with sentiment analysis and other schools of research. But there is no simple formula.– CQMCommented Aug 24, 2016 at 21:41
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1Someone wants to buy 10% of the total shares, and the sellers don't want to sell. How much the price goes above the last traded price will depend totally on how much it takes to motivate the holders to sell. It's so unpredictable that there are situations where the sale price is actually lower. For instance, earnings reports were just released and investors are disappointed. It might flip around where the holders are competing to sell, thus the price will drop. There is no way to predict this with a mathematical formula. This is why the pros make the big bucks.– XalorousCommented Aug 24, 2016 at 23:50
It depends completely on the current order book for that security. There is literally no telling how that buy order would move the price of a stock in general.
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as much as i heard if more people interested to buy than sell a particular share , stock price will move up . So its a common sense that there is formula like price is proportional to the demand Commented Aug 24, 2016 at 17:46
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2@AnirbanBhui It's not common sense because every security has a different order book. There are different numbers of people willing to buy and sell different numbers of shares at different prices to different depths. Every security also trades a different total volume of shares every day. There is no formula because there can be any number of people willing to buy or sell for one single penny more or less than the last sale price.– quidCommented Aug 24, 2016 at 17:50
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i'm new in this subject ! sorry for that . what is security here ? Commented Aug 24, 2016 at 18:06
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The problem with predicting with accuracy what a stock price will do in any given situation is that there are two main factors that affect a stocks price.
The first factor is based somewhat in math as it takes into account numbers such as supply and demand, earnings per share, expected earnings, book value, debt ratio and a wide variety of other numbers. You can compile all those numbers into a variety of formulas and come up with a rational estimate of what the stock should sell for. This is all well and good and if the market were entirely rational it would rarely make news because it would be predictable and boring. This is where our second factor throws a wrench in the works.
The second factor affecting stock price is emotional. There are many examples of people's emotions affecting stock price but if you would like a good example look up the price fluctuations of Apple (AAPL) after their last couple earnings reports. Numerically their company looks good, their earnings were healthy, their EPS is below average yet their price fell following the report. Why is that? There really isn't a rational reason for it, it is driven by the emotions behind unmet expectations. In a more general sense sometimes price goes down and people get scared and sell causing further decline, sometimes people get excited and see it as opportunity to buy in and the price stabilizes. It is much more difficult to anticipate the reaction the market will have to people's emotional whims which is why predicting stock price with accuracy is near impossible.
As a thought along the same line ask yourself this question; if the stock market were entirely rational and price could be predicted with accuracy why is there such a wide range of available strike prices available in the options market? It seems that if stock price could be predicted with anything remotely reassembling accuracy the options market need a much smaller selection of available strike prices.
