Can anyone help me understand that “why seller want to decrease/low the price of any stock?”
Actully what i think, seller wants to increase the price of a stock to sell at high price.
And “why buyer want to increase/high the price of any stock?”
Actully what i think, buyer wants to decrease the price of a stock to buy at low price.
Please help me to understand clearly.
Hi @saurabhdubey You’re on the right track in thinking about selling high and buying low, but in the stock market, it’s not the seller or buyer directly manipulating the price. Instead, it’s supply and demand that drives prices up and down. Remember: The stock market is a complex ecosystem where the price of a stock is constantly changing based on the interplay of supply and demand. While sellers and buyers have their own motivations for buying and selling shares, it’s ultimately the collective actions of all market participants that determine the price. But let’s understand scenarios like;
Why might a seller lower the price of a stock?
- Quick Sale: They need to sell their shares quickly, perhaps due to unexpected expenses or needing cash for another investment. Lowering the price makes it more attractive to buyers and increases the chances of a rapid sale.
- Profit Taking: They bought the stock at a lower price and want to lock in their profit, even if it means selling for less than the peak price.
- Negative Outlook: They believe the stock price will fall further and want to get out before that happens. This could be due to concerns about the company’s performance, industry trends, or broader market conditions.
Example: Imagine Company X’s stock is at Rs. 100. You own 100 shares you bought for Rs. 50 each, so you have a profit of Rs. 50 per share. If you think the stock is going to drop, you might sell some or all of your shares at Rs. 90 to secure your profit before the price falls further.
Why might a buyer increase the price of a stock?
They believe the stock price will rise in the future due to strong company performance, industry growth, or other positive factors. They’re willing to pay more now to capitalize on the expected future gain.
Short Squeeze: Some traders “short sell” stocks, hoping to buy them back later at a lower price. If the stock price starts to rise unexpectedly, these short sellers are forced to buy back shares quickly, driving the price even higher.
Example: You believe Company Y’s new product will be a success, boosting its profits and driving the stock price up. You might be willing to pay Rs.110 per share now to get in before the price potentially climbs higher.
I believe, when evaluating a stock, don’t just focus on the current price. Consider the company’s fundamentals, industry trends, and overall market conditions to make informed investment decisions.
I hope this helps, do let me know if you have any further questions, happy to help
Would be great to get other community members inputs on the same @Piyush @deepakchandar ?
Thanks @tanya.kulshrestha for making me understand.