Ask a Fool: How Are Share Prices Determined by Buying and Selling?

What is a "sell-off" if all shares are owned all the time, and how do buying and selling determine a stock price?

Jan 29, 2014 at 7:52PM

In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool One analyst Jason Moser takes a question from a reader who asks: "If every share is owned 100% of the time, then what is a "sell off" and how are share prices determined? I always thought selling reduced the price and buying drove prices up -- but if there is an equal number of buys and sells, this can't be." Jason explains that in some cases, buying will drive prices up, but that's when a stock is in demand. But consider a company that has just announced a lot of bad news, prompting investors to head for the exits on the stock. While for every seller there's also a buyer, there's also a fundamental negotiation at work here. Buyers are going to buy only when they feel the price represents enough of a bargain to account for whatever risk may be involved. The buying here isn't pushing up prices; it's soaking up the inventory that's offered up for sale because the sellers want out. And that ultimately is what can cause a sell-off.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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