When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?

Question

When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?

In: 103

Answer 1

There are a bunch of people with sale orders and a bunch of people with buy orders.

A buyer’s price is essentially the most they’re willing to pay, and a seller’s price is the lowest they’re willing to receive, so whenever the highest buy order price goes above the lowest sell order price a transaction is made. The market price is just a history of past transactions.