There’s a lot going on in the stock market this week and both and Reddit in general are inundated with questions about it. This is an opportunity to ask for explanations for concepts related to the stock market. All other questions related to the stock market will be removed and users directed here.
How does buying and selling stocks work?
What is short selling?
What is a short squeeze?
What is stock manipulation?
[What is a hedge fund?](https://www.reddit.com/r/explainlikeimfive/comments/l6ptb7/eli5_what_is_a_hedgefund/)
What other questions about the stock market do you have?
In this thread, top-level comments (direct replies to this topic) are allowed to be questions related to these topics as well as explanations. Remember to follow all other rules, and discussions unrelated to these topics will be removed.
**Please refrain as much as possible from speculating on recent and current events.** By all means, talk about what has happened, but this is not the place to talk about what will happen next, speculate about whether stocks will rise or fall, whether someone broke any particular law, and what the legal ramifications will be. Explanations should be restricted to an objective look at the mechanics behind the stock market.
EDIT: It should go without saying (but we’ll say it anyway) that any trading you do in stocks is at your own risk. **is not the appropriate place to ask for or provide advice on stock buy, selling, or trading.**
In: Economics
Here’s something that was never 100% clear to me- what’s the actual process that takes place when a share is purchased or sold that makes the price go up/down? For example, John owns a single share of Random Company, currently being traded at 100 dollars a share. John decides to cash in and sell his share. He would then approach the stock exchange where the trading takes place (well, his broker in real life, but whatever), and state that he owns a single share of Random Company and would like to sell it for $100.
The end result of that is John gets $100, and the price ticks ever so slightly down.
My question is concerned with why does it go down, and who/what decides that. The economic mechanism of supply/demand is clear to me, but since this isn’t really a marketplace where bartering can take place, it’s not like potential sellers would see that John has just sold his share and would therefore adjust their offered price- it all happens independently from the traders.
So what happens there? Does the stock exchange’s algorithm adjust the price because more shares are now available for purchase? Something else?
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