How much do large sell orders affect stock price?
In general, how does a large open market stock sale affect prices? A very general answer, all other things being equal, the price will move down. However there is nothing general. It depends on total number of shares in market and total turn over for that specific shares. The order book for the day etc. What is the maximum percentage of a company you could sell per day before the trading freezes, and what factors matter? Every stock exchange has rules that would determine when a particular stock would be suspended from trading, generally a 10-20% swing [either ways]. Generally highly liquid stock or stock during initial listing are exempt from such limits as they are left to arrive the market price ...  A large sell order may or may not swing the price for it to get suspended. At times even a small order may do ... again it is specific to a particular stock. The volume required to significantly move the price of a security depends completely on the orderbook for that particular security. There are a variety of different reasons and time periods that a security can be halted, this will depend a bit on which exchange you're dealing with. This link might help with the halt aspect of your question: https://en.wikipedia.org/wiki/Trading_halt "Most of the investors who have large holdings in a particular stock have pretty good exit strategies for those positions to ensure they are getting the best price they can by selling gradually into the volume over time. Putting a single large block of stock up for sale is problematic for one simple reason: Let's say you have 100,000 shares of a stock, and for some reason you decide today is the day to sell them, take your profits, and ride off into the sunset.  So you call your broker (or log into your brokerage account) and put them up for sale.  He puts in an order somewhere, the stock is sold, and your account is credited. Seems simple, right?  Well...not so fast. Professionals - I'm keeping this simple, so please don't beat me up for it! The way stocks are bought and sold is through companies known as ""market makers"".  These are entities which sit between the markets and you (and your broker), and when you want to buy or sell a stock, most of the time the order is ultimately handled somewhere along the line by a market maker.  If you work with a large brokerage firm, sometimes they'll buy or sell your shares out of their own accounts, but that's another story. It is normal for there to be many, sometimes hundreds, of market makers who are all trading in the same equity.  The bigger the stock, the more market makers it attracts.  They all compete with each other for business, and they make their money on the spread between what they buy stock from people selling for and what they can get for it selling it to people who want it. Given that there could be hundreds of market makers on a particular stock (Google, Apple, and Microsoft are good examples of having hundreds of market makers trading in their stocks), it is very competitive.  The way the makers compete is on price.  It might surprise you to know that it is the market makers, not the markets, that decide what a stock will buy or sell for. Each market maker sets their own prices for what they'll pay to buy from sellers for, and what they'll sell it to buyers for.  This is called, respectively, the ""bid"" and the ""ask"" prices.  So, if there are hundreds of market makers then there could be hundreds of different bid and ask prices on the same stock.  The prices you see for stocks are what are called the ""best bid and best ask"" prices.  What that means is, you are being shown the highest ""bid"" price (what you can sell your shares for) and the best ""ask"" price (what you can buy those shares for) because that's what is required.  That being said, there are many other market makers on the same stock whose bid prices are lower and ask prices are higher.  Many times there will be a big clump of market makers all at the same bid/ask, or within fractions of a cent of each other, all competing for business.  Trading computers are taught to seek out the best prices and the fastest trade fills they can. The point to this very simplistic lesson is that the market makers set the prices that shares trade at.  They adjust those prices based (among other factors) on how much buying and selling volume they're seeing.  If they see a wave of sell orders coming into the system then they'll start marking down their bid prices.  This keeps them from paying too much for shares they're going to have to find a buyer for eventually, and it can sometimes slow down the pace of selling as investors and automated systems notice the price decline and decide to wait to sell.  Conversely, if market makers see a wave of buy orders coming into the system, they'll start marking their ask prices up to maximize their gains, since they're selling you shares they bought from someone else, presumably at a lower price.  But they typically adjust their prices up or down before they actually fill trades.  (sneaky, eh?) Depending on how much volume there is on the shares of the company you're selling, and depending on whether there are more buyers than sellers at the moment, your share sell order may be filled at market by a market maker with no real consequence to the share's price. If the block is large enough then it's possible it will not all sell to one market maker, or it might not all happen in one transaction or even all at the same price. This is a pretty complex subject, as you can see, and I've cut a LOT of corners and oversimplified much to keep it comprehensible.  But the short answer to your question is -- it depends. Hope this helps. Good luck!"
I think your premise is slightly flawed. Every investment can add or reduce risk, depending on how it's used. If your ordering above is intended to represent the probability you will lose your principal, then it's roughly right, with caveats. If you buy a long-term government bond and interest rates increase while you're holding it, its value will decrease on the secondary markets. If you need/want to sell it before maturity, you may not recover your principal, and if you hold it, you will probably be subject to erosion of value due to inflation (inflation and interest rates are correlated). Over the short-term, the stock market can be very volatile, and you can suffer large paper losses. But over the long-term (decades), the stock market has beaten inflation. But this is true in aggregate, so, if you want to decrease equity risk, you need to invest in a very diversified portfolio (index mutual funds) and hold the portfolio for a long time. With a strategy like this, the stock market is not that risky over time. Derivatives, if used for their original purpose, can actually reduce volatility (and therefore risk) by reducing both the upside and downside of your other investments. For example, if you sell covered calls on your equity investments, you get an income stream as long as the underlying equities have a value that stays below the strike price. The cost to you is that you are forced to sell the equity at the strike price if its value increases above that. The person on the other side of that transaction loses the price of the call if the equity price doesn't go up, but gets a benefit if it does. In the commodity markets, Southwest Airlines used derivatives (options to buy at a fixed price in the future) on fuel to hedge against increases in fuel prices for years. This way, they added predictability to their cost structure and were able to beat the competition when fuel prices rose. Even had fuel prices dropped to zero, their exposure was limited to the pre-negotiated price of the fuel, which they'd already planned for. On the other hand, if you start doing things like selling uncovered calls, you expose yourself to potentially infinite losses, since there are no caps on how high the price of a stock can go. So it's not possible to say that derivatives as a class of investment are risky per se, because they can be used to reduce risk. I would take hedge funds, as a class, out of your list. You can't generally invest in those unless you have quite a lot of money, and they use strategies that vary widely, many of which are quite risky. Please refer to this question to understand the basics of how an order is matched. How do exchanges match limit orders?  Now most of the times even Block orders follow the same matching criteria. I think you are assuming that for every large buy order there is a matching large sell order. This is not true.     So on the Buy side at various point in times there were Buy Orders, with Single order more than 10,000 shares. On the sell side to fulfil these orders there may or may not be a single order of 10,000. More often there will be quite a few smaller orders or 500, 1000 or whatever amount that are present in the queue based on the amount & time sort order or even partially matching out of a sell order of 10,000 ... Similarly when there is a large sell order of more than 10,000 , these may not have got filled in by a large buy order but by smaller buy orders etc ...   So if you average out the amounts on the buy side and the sell side there would definately be a difference. The analysis of this difference is as indicated in your question, buy price is more than sell price and hence people are bullish ... "First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about   Scotttrade but want to be sure before I start. It seems to be the   least expensive and most user-friendly to me. ""Best"" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several ""discount"" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From   what I understand it comes into play when an investor borrows money   from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account   to give me more money to invest or keep it at a certain amount for an   extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds." In order: A seller of the stock (duh!). You don't know who or why this stock was sold. It could be any reason, and is of no concern of yours. It doesn't matter. Investors (pension funds, hedge funds, individual investors, employees, management) sell stock for many reasons: need cash, litigation, differing objectives, sector rotation, etc. To you, this does not matter. Yes, it does affect stock market prices: If you were not willing to buy that amount of shares, and there were no other buyers at that price, the seller would likely choose to lower the price offered. By your purchase, you are supporting the price. It depends on how you place your stop order and the type of stop orders available from your broker. If you place a stop market order and the following day the stock opens below your stop your stock will be stopped out at or around the opening price, meaning you can potentially end up with quite a large gap. If you place a stop limit order, say you place your stop at $10.00 with a limit price of $9.90, and if the price opens below $9.90, say at $9.50, your limit sell order of $9.90 will be placed onto the market but it will not be executed until the price goes back up to $9.90 or above. The third option is to place a Guaranteed Stop Loss, and as specified you are guaranteed your stop price even if the price gaps down below your stop price. You will be paying an extra fee for the Guaranteed Stop Loss Order, and they are usually mainly available with CFD Brokers (so if you are in the USA you might be out of luck). A bullish (or 'long') call spread is actually two separate option trades.  The A/B notation is, respectively, the strike price of each trade. The first 'leg' of the strategy, corresponding to B, is the sale of a call option at a strike price of B (in this case $165).  The proceeds from this sale, after transaction costs, are generally used to offset the cost of the second 'leg'. The second 'leg' of the strategy, corresponding to A, is the purchase of a call option at a strike price of A (in this case $145). Now, the important part: the payoff.  You can visualize it as so. This is where it gets a teeny bit math-y.  Below, P is the profit of the strategy, K1 is the strike price of the long call, K2 is the strike price of the short call, T1 is the premium paid for the long call option at the time of purchase, T2 is the premium received for the short call at the time of sale, and S is the current price of the stock.  For simplicity's sake, we will assume that your position quantity is a single option contract and transaction costs are zero (which they are not). P = (T2 - max(0, S - K2)) + (max(0, S - K1) - T1) Concretely, let's plug in the strikes of the strategy Nathan proposes, and current prices (which I pulled from the screen).  You have: P = (1.85 - max(0, 142.50 - 165)) - (max(0, 142.50 - 145)) = -$7.80 If the stock goes to $150, the payoff is -$2.80, which isn't quite break even -- but it may have been at the time he was speaking on TV. If the stock goes to $165, the payoff is $12.20. Please do not neglect the cost of the trades!  Trading options can be pretty expensive depending on the broker.  Had I done this trade (quantity 1) at many popular brokers, I still would've been net negative PnL even if NFLX went to >= $165. As said previously, most of the time volume does not affect stock prices, except with penny stocks. These stocks typically have a small volume in the 3 or 4 figure range and because of this they typically experience very sharp rises and drops in stock prices, contrasting normal stocks that go up and down constantly every minute. Volume is not one thing you should be looking at when analyzing a stock in most cases, since it is simply the number of people of trades made in a day. That has no effect on the value of the company, whereas looking at P/E ratios, dividend growth, etc all can be analyzed to see if a company is growing and is doing well in its field. If I buy an iPhone, it doesn't matter if 100 other people or 100,000 other people have bought it as well, since they won't really affect my experience with the product. Whereas the type of iPhone I buy will. Securities change in prices. You can buy ten 10'000 share of a stock for $1 each one day on release and sell it for $40 each if you're lucky in the future for a gross profit of 40*10000 = 400'0000