Are traders 100% responsible for a stock's price changes?
"Traders = every market participant. Not some shadow figure that excludes you just because you passively drop cash into a 401k Vanguard fund every paycheck. So yes, if everyone stopped trading then the price won't move. Trades are 100% responsible for the prices you see on charts and tickers. A stock won't be worth ""$100"" if nobody ever traded $100 for it. It only has that price now or in the past because somebody placed an order for it at $100 and somebody else filled that order at $100" "When people talk about ""the price"" of a stock, they usually mean one of the following: Last price:  The price at which a trade most recently took place.  If someone sold (and someone else bought) shares of XYZ for $20 each, then until another trade occurs, the last price of the stock will be quoted at $20. Bid price: The highest price at which someone is currently offering to buy the stock. Ask price: The lowest price at which someone is currently offering to sell the stock. As you can see, all of these are completely determined by the people buying and selling the stock." Value is the key word here. Traders should ideally trade on the perceived future value of a company.  Changes in the perceived future value is what leads them to buy and sell shares. That said, if a company were to have some catastrophe happen (say it and all of its employees and property disappeared)  and somehow every shareholder agreed to not sell, the companies market capitalization would remain unmoved even though the value of the company is gone. So theoretically yes, but it is unlikely. "Yes, the value of a stock is completely, 100% determined by what people are willing to pay for it in conjunction with what people who have it are willing to sell it for. If something really bad happened to a company, like their only factory burned to the ground, and the traders didn't care, then I guess, in that scenario, the value of the stock would not change. But you can spin all sorts of hypotheticals of that sort. If dogs could talk, would German Shepherds speak German? Etc. Any answer is pretty meaningless because the premise is wildly unlikely. As CQM notes, ""traders"" in this context means everyone who buys or sells stock. If you buy stock, that includes you. They're not some mystical cabal somewhere. If you see a stock listed at, whatever, $50, and you are not willing to pay more than $40 for it, then you refuse to buy, and so you tend to force the price down. If you're not a billionaire, then your impact on the market is tiny, but the market is made up of millions of people each with tiny influence. Note that all this is true not just of the stock market, but of every product on the market. A product is worth whatever the owner is willing to sell it for and people are willing to pay. This is what determines the price of everything from houses to toasters. It's a little theory I've invented that I like to call, ""the law of supply and demand"". :-)" Yes traders, living or algorithmic, are the only direct factors that can cause a change in the price of a marketable item. Traders can be affected by news, broken exchanges ;), emotional cycles, lunar cycles, time the trader goes to lunch (or a power cycle if you are an algo running on that unfortunate OS), anything.
Bid and ask prices of stocks change not just daily, but continuously.  They are, as the names suggest, what price people are asking for to be willing to sell their stock, and how much people are bidding to be willing to buy it at that moment. Your equation is accurate in theory, but doesn't actually apply.  The bid and ask prices are indicators of the value of the stock, but the only think you care about as a trader are what you actually pay and sell it for.  So regardless of the bid/ask the equation is: Since you cannot buy an index directly (index, like indicator) it doesn't make sense to discuss how much people are bidding or asking for it.  Like JoeTaxpayer said, you can buy (and therefore bid/ask) for ETFs and funds that attempt to track the value of the S&P 500. "In US public stock markets there is no difference between the actions individual retail traders are ""permitted"" to take and the actions institutional/corporate traders are ""permitted"" to take.  The only difference is the cost of those actions.  For example, if you become a Registered Market Maker on, say, the BATS stock exchange, you'll get some amazing rebates and reduced transaction prices; however, in order to qualify for Registered Market Maker status you have to maintain constant orders in the book for hundreds of equities at significant volumes.  An individual retail trader is certainly permitted to do that, but it's probably too expensive. Algorithmic trading is not the same as automated trading (algorithmic trading can be non-automated, and automated trading can be non-algorithmic), and both can be anywhere from low- to high-frequency.  A low-frequency automated strategy is essentially indistinguishable from a person clicking their mouse several times per day, so: no, from a legal or regulatory perspective there is no special procedure an individual retail trader has to follow before s/he can automate a trading strategy.  (Your broker, on the other hand, may have all sorts of hoops for you to jump through in order to use their automation platform.) Last (but certainly not least) you will almost certainly lose money hand over fist attempting bid-ask scalping as an individual retail trader, whether your approach is algorithmic or not, automated or not.  Why?  Because the only way to succeed at bid-ask scalping is to (a) always be at/near the front of the queue when a price change occurs in your favor, and (b) always cancel your resting orders before they are executed when a price change occurs against you.  Unless your algorithms are smarter than every other algorithm in the industry, an individual retail trader operating through a broker's trading platform cannot react quickly enough to succeed at either of those.  You would have to eschew the broker and buy direct market access to even have a chance, and that's the point at which you're no longer a retail trader. Good luck!" "But speculation is absolutely intended to happen, and is considered necessary for healthy a investment environment.  What I am saying, however, is that this desire to rid the world of HFT appears to be moral rather than logical. There is very little reason to eliminate HFT as it stands, although there appears to be a propensity for very emotional responses to the basic concept. Ones I can appreciate. However I am suggesting they are misguided as the people who should be upset with HFT are the hedge fund managers and day traders they are outwitting, not you or me who buy and sell shares on a whim every so often. If you want to ban day traders that is a separate argument I don't want to go into.  The idea that these computer algorithms are all set to ""sell,sell,sell"" is provably nonsensical. If that were the case, all of the HFT participants would have gone massively bankrupt during the flash crashes. Also, it is quite patently the case that somebody has to be buying in order for anybody to sell. Saying ""this is what caused some of the crashes"" is just your desire for a simple explanation. It must have been more complex than this, and to my knowledge none of these crashes have been adequately explained although some poorly designed algorithms have been implicated. Note that in one of these cases IIRC a fund closed its doors due to the losses, and the market was largely unaffected. So it seems like a problem that self corrects in this case, and one that only *harms* the participant that erred.  Also, to correct a basic misunderstanding, selling happens all of the time, and does not inherently drive the price down. There are by definition an *equal number of sales to purchases*. What drives the price down is *the people buying being willing to pay less*.  EDIT: as another aside, a point I have made elsewhere and seems suitable to make here: flash crashes, whilst causing panic, are again something only the professional intra-day trading community are likely to be affected by. Their very name implies so. The reason being that anybody investing based on the *long term investment potential* of a company will only benefit in the temporary drop in price, as they can purchase more of the company at a bargain price. Any intelligent investor will not be fazed by the drop in price, as price has *no bearing on a company's real value*, and stocks do tend towards this value over time, whatever happens over the short term. The only case in which it could is if the company owns a large portfolio of stock that itself devalues dramatically that they intended to sell and as a result experience cash flow problems. This is so incredibly unlikely with a flash crash as to be ignored." I would make a change to the answer from olchauvin: If you buy a call, that's because you expect that the value of call options will go up. So if you still think that options prices will go up, then a sell-off in the stock may be a good point to buy more calls for cheaper. It would be your call at that point (no pun intended). Here is some theory which may help. An options trader in a bank would say that the value of a call option can go up for two reasons: The VIX index is a measure of the levels of implied volatility, so you could intuitively say that when you trade options you are taking a view on two components: the underlying stock, and the level of the VIX index. Importantly, as you get closer to the expiry date this second effect diminishes: big jumps up in the VIX will produce smaller increases in the value of the call option. Taking this point to its limit, at maturity the value of the call option is only dependent on the price of the underlying stock. An options trader would say that the vega of a call option decreases as it gets closer to expiry. A consequence of this is that if pure options traders are naturally less inclined to buy and hold to expiry (because otherwise they would really just be taking a view on the stock price rather than the stock price & the implied volatility surface). Trading options without thinking too much about implied volatities is of course a valid strategy -- maybe you just use them because you will automatically have a mechanism which limits losses on your positions. But I am just trying to give you an impression of the bigger picture. "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!" When stocks have a change in price it is because of a TRADE. To have a trade you have to have both a buyer and a seller.  When the price of a security is going up there are an equal amount of shares being sold as being bought. When the price of a security is going down there are an equal amount of shares being bought as being sold.  There almost always is an unequal amount of shares waiting to be sold compared to the amount waiting to be bought. But waiting shares do not move the price, only when the purchase price and the sale price agree, and a trade occurs, does the price move.  So the price does not go down because more shares are being sold. Neither does the price go up because more shares are being bought. In general stock markets are very similar to that, however, you can also put in limit orders to say that you will only buy or sell at a given price. These sit in the market for a specified length of time and will be executed when an order arrives that matches the price (or better). Traders who set limit orders are called liquidity (or price) makers as they provide liquidity (i.e. volume to be traded) to be filled later. If there is no counterparty (i.e. buyer to your seller) in the market, a market maker; a large bank or brokerage who is licensed and regulated to do so, will fill your order at some price. That price is based on how much volume (i.e. trading) there is in that stock on average. This is called average daily volume (ADV) and is calculated over varying periods of time; we use ADV30 which is the 30 day average. You can always sell stocks for whatever price you like privately but a market order does not allow you to set your price (you are a price taker) therefore that kind of order will always fill at a market price. As mentioned above limit orders will not fill until the price is hit but will stay on book as long as they aren't filled, expired or cancelled. "Often these types of trades fall into two different categories.   An error by broker or exchange.  Exchange clearing out part of their books incorrectly is an example.  Most exchanges make firms reopen their positions for after market hours.  There may have been an issue doing so or exchange could incorrectly cancel positions.  I was in the direct feed industry for years and this was a big issue.  At the same time the broker can issue a no limit buy on accident (or has software that is prospecting and said software has a bug or written poorly).   unscrupulous parties looking to feign an upswing or downswing in market.  Let's say you hold 500k shares in a stock that sells for $11.  You could possibly buy 100 shares for $13.  Trust me you will find a seller.  Then you are hoping that people see that trade as a ""norm"" and trade from there, allowing you to rake in $1M for spending an extra $200 - NOTE this is not normal and an extreme example.  This was so common in the early days of NASDAQ after hours that they discontinued using the after hours trades as part of historical information that they keep like daily/yearly high or closing price.  The liquidity allows for manipulation.  It isn't seen as much now since this has been done a million times but it does still happen."