Since every stock sold in the secondary market is always bought by another investor,why is that whenever there’s a huge sale by big investors the market is always affected
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Since every stock sold in the secondary market is always bought by another investor,why is that whenever there’s a huge sale by big investors the market is always affected
Every sale does have a buyer, but the important question is: At what price is the buyer willing to buy? Take a simple example. Imagine a stock is trading at ₦100. A big investor wants to sell 1 million shares to take profit. At ₦100, there may only be buyers for 100,000 shares. So the investor stillRead more
Every sale does have a buyer, but the important question is: At what price is the buyer willing to buy?
Take a simple example.
Imagine a stock is trading at ₦100.
A big investor wants to sell 1 million shares to take profit. At ₦100, there may only be buyers for 100,000 shares.
So the investor still has 900,000 shares left to sell. To attract more buyers, the seller may have to accept lower prices:
₦100 → ₦99 → ₦98 → ₦97…
The buyers are still there, but the available buyers at each price level are limited.
This is where supply and demand come in.
If many investors suddenly want to sell while fewer investors are willing to buy at the current price, sellers start accepting lower prices. The market price then falls.
For example, if I bought 10,000 shares at ₦50 and the price rises to ₦80, I may decide to take profit. If thousands of other investors think the same way, there can be heavy selling pressure.
So the issue isn’t that the shares are being sold without buyers.
The issue is that there may not be enough buyers willing to buy all those shares at the current price.
That’s why big profit-taking can affect a stock price, especially when the stock has limited liquidity or a small free float.
In simple terms:
Every seller needs a buyer, but every seller doesn’t get the price they want.
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See lessIn the stock market, when investors decide to sell shares of a company to take their profits, it can affect the stock's price. Let me break this down in a way that Mama Ngozi in the village can understand.Imagine Mama Ngozi has a tomato farm. She plants tomatoes and waits for them to grow. When theRead more
In the stock market, when investors decide to sell shares of a company to take their profits, it can affect the stock’s price. Let me break this down in a way that Mama Ngozi in the village can understand.
Imagine Mama Ngozi has a tomato farm. She plants tomatoes and waits for them to grow. When the tomatoes are ripe and ready for harvest, Mama Ngozi takes them to the market to sell. She sells some and makes a profit.
Now, let’s say Mama Ngozi’s friend, Mr. Emeka, also has a tomato farm. He sees that tomatoes are selling well in the market, so he decides to sell a large quantity of his tomatoes to make a profit too.
If both Mama Ngozi and Mr. Emeka bring a lot of tomatoes to the market at the same time, the price of tomatoes may drop because there are more tomatoes available than people buying them. This is similar to what happens in the stock market.
When big investors sell a large amount of shares in a company all at once, it can create an oversupply of those shares in the market. This oversupply can lead to a decrease in demand for the shares, causing the price to fall. As a result, when there is a huge sale by big investors, it can impact the overall market by influencing stock prices to go down.
So, just like in the tomato market, when there is more supply than demand, the price tends to drop. This is why profit-taking by big investors can affect the price of stocks in the market.
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