Stock market question?

Question

If the stock market is driven by supply and demand, and the price of a stock is goverened by the amount of supply vs demand at any given time, and there are two sides to every trade in which for every buyer there must be a seller and vice versa, why then does a stock rise or fall? Shouldn't it be in equilibrium since this is the case?

Example being yesterday.....a huge "sell-off"....if for every stock people were trying to dump there had to be a buyer to get rid of it, why did the market tank instead of go up?

Answer 1

It doesn't work the way you think. When you give a buy order the market moves up by a tick or 1/8th basis point. Similarly when it is a sell order it moves down by one tick which is again 1/8th. At any point in time whoever is predominant either the buyers or sellers determine where the market is heading. Equilibrium is maintained by Specialists in the exchange who accepts sell orders when nobody is there to buy someones stock or sell when no one is around to buy someones shares, but at price determined by this movement described above. So it is who is the predominant player that determines the direction of the market.

Answer 2

What happens is that buyers and sellers send bid and ask prices (buyers send bids, sellers send ask prices). these forces determine the supply and demand for the stock. if it is in high demand, buyers will bid more and sellers will ask more. When there is a sell off, the demand for the stock is lower, so buyers will bid less and and sellers will ask less to get rid of the stock.

Answer 3

It's the price of the stock itself that goes down, ... there is equilibrium, but as the price someone is willing to sell a share for drops the price of the stock itself drops. When the market goes up, more people are willing to pay more for the same share and the stock price rises.

Answer 4

Your question is not clear.