Sunday 23 December 2012

The Reasons for Selling and for Buying a Stock

For every single trade, there is always a buyer and a seller.

The Reasons for Selling

Seller:  "This stock stinks.  I can make more money somewhere else."

Seller:  "I need money for my new car."

The Reasons for Buying

Buyer:  "This company is going to make me some money."

Buyer:  "This company is going to make me some money."

There are a few reasons for selling a stock, but there is usually only one reason for buying a stock.  :-)

The seller thinks the stock stinks, whereas the buyer thinks the company is great.
The seller thinks the stock is still good but he needs the money, and the buyer bought because he thinks the company is great.

Thousands of orders a day cause the market price of a company to move up and down.  However, the market price of a stock is determined only by a small number of players and not by all of the people.


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