The Basic Question you should know...

[ANCOLL]

Dear traders,
maybe this sounds stupid, but it's bugging my mind if i don't ask.


How do stocks move up and down?

It's very funny, because I am not really clear about stock's moving.
Once I thought about the volume of buying and selling i.e. if too many buyers, the stocks will move up.
But I found a question regarding about total volume of stock selling and buying
in here

http://answers.yahoo.com/question/in...7205147AASonUf


Then, if it's not the volume, so how the stocks move up and down?
could someone elaborate it?



Thank you so much in advance..

[awtrader]

Here's my best brief attempt...

Equity stocks have a fixed float (number of shares), unlike options. A trade occurs when someone sells some shares they own (or borrow) to someone else who buys them. So every trade is BOTH a sell and buy. But trade will only happen when agree on a price. That is a price at which the seller is willing to offer(ask) stock AND at which the buyer is willing pay(bid). In the quotes you can see the bid / ask and the size (number of shares) that are presented on each side. The "tape prints" (historical terms) show the actual trades which have been recorded with a price and size. The sum of those sizes is the volume traded.

I'm sure you have experienced a case where you felt you had to sell a stock so you were willing to take the bid though it was less than you wanted, and vice-versa. That is price discovery. And it is the continuously changing demand and supply across a range of prices which determines how the tape reads. I might note that apparently what you see in level2 quotes or other market depth views is generally not an accurate representation of true demand and supply.

Volume, then, is just a record of how many such transactions occur in a given period of time. It is obviously an indication of how much/many parties want to accumulate or distribute the stock. Generally moves on high volume are considered more important than ones on low volume.

-aw

[ANCOLL]

@awtrader
Thank you,
From your posting I assume that stock price will go up if the seller give the offer (ask) higher than the bid from buyer or vice versa.
is it true?

Sorry, I am still not very clear about how the price move up or down if buyer and seller are in the same coin indicated by volume transaction.

[chinigun]

Ancoll,

It's at what price the volume is transacted at that makes all the difference. ie If there are more buyers willing to pay the ask price then there are sellers willing to sell at this price then this will push the price up to the next bid/ask. Conversely if there are more sellers than buyers willing to sell at the bid price, then this pushes the price down to the next bid/ask.

As for the yahoo article, yes all volume transacted would have involved a buyer and a seller but I think the person asking the original question was perhaps looking for how many shares were transacted at the bid versus the ask as this is a good indication of investor sentiment. One way to measure this on the broader market is to view the NYSE $TICK readings as this gives you the reading of how many stocks are in upticks versus downticks.

If you are interested in what moves markets, then you should thoroughly read through all of Dr Steenbarger's posts on his blog site (one of the best in my opinion)
http://traderfeed.blogspot.com

For developing traders Steenbarger wrote two great posts on what moves markets:

http://traderfeed.blogspot.com/2009/...ders-what.html
http://traderfeed.blogspot.com/2009/...s-more-on.html

I hope that helps.

cheers,

Michael