Imagine a giant, noisy marketplace where everyone shouts out how much they want to pay for an apple. Some people yell low prices, others yell high ones. The price of the apple changes every second depending on who is shouting loudest and fastest.
The Shouting Match
In the stock market, buyers shout one number (the bid) and sellers shout another (the ask). If a buyer shouts $10.00 and a seller shouts $9.95, they agree. A trade happens at somewhere in between.
Why It Moves
Prices go up when there are more eager buyers than sellers. Prices drop when there are too many people trying to sell but no one wants to buy yet. The market is always looking for the perfect balance point where everyone is happy.
Examples
- Like a game of musical chairs where the score goes up when everyone wants to sit at the same table.
- You check your phone and see the price of Bitcoin change every few seconds because people are buying and selling fast.
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See also
- What Is Chart Analysis?
- What is Relative strength index (RSI)?
- What are margin calls?
- What are Futures?
- What are high-frequency strategies?