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Offlines240779
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Simple question: Is one always able to sell a stock?
    #19029899 - 10/25/13 07:41 AM (10 years, 3 months ago)

If I buy a lot of stock at a low price and the share price of the stock goes up really high, that's great and I get to make a big profit. But am I guaranteed to be able to sell all of my shares?

I've been curious about the exchange of securities over the years and have done a little reading on it, but everything I';ve ever read is so utterly basic, never giving a true understanding of how it all works, and leaving me with questions such as this one. So, on a second, note, what's the best way to gain a true understanding of it?


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Re: Simple question: Is one always able to sell a stock? [Re: s240779]
    #19029932 - 10/25/13 07:58 AM (10 years, 3 months ago)

You are never guaranteed to be able to sell any shares.
You can only ever sell if someone is willing to buy.
Plus, typically when a company is going bankrupt they keep it a secret. Then when they announce it, their shares are put on a trading halt. That means they are still listed, but you cant trade. Until the market absorbs the new position. And usually that means the price plummets.

Still, if you got in early, and the company is booming, and the share price is going up. Yes you'd be able to sell, because lots of people are willing to buy.

Warren Buffet is like the second richest man on earth, all from the share market... he said, "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful."


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Re: Simple question: Is one always able to sell a stock? [Re: Vort]
    #19029948 - 10/25/13 08:05 AM (10 years, 3 months ago)

Why are lots of people willing to buy when the price goes up? I would presume that people would think they missed out on a good opportunity (buying it whe the price was low) or think that it's a bubble.


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Re: Simple question: Is one always able to sell a stock? [Re: s240779]
    #19029963 - 10/25/13 08:10 AM (10 years, 3 months ago)

It's the other way round! When lots of people are willing to buy, the price goes up.

It's that economic argument, price/demand ratio. If demand is high, the price people will pay goes up. If the demand is low the price goes down.

If a company is booming everyone wants in. Price goes up. Yay. ps. Warren Buffet doesnt buy!
If the company is going broke, or maybe just released some bad numbers, the demand goes down, the price goes down.


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Re: Simple question: Is one always able to sell a stock? [Re: Vort]
    #19029983 - 10/25/13 08:19 AM (10 years, 3 months ago)

I guess if it goes too high, people will have their doubts. So perhaps the mantra should be: buy low, sell medium.


Also, do you have any insight into the mechanism by which the price goes up? It just doesn't make any sense to me. Let's say a bunch of random investors are holding shares that they purchased at a low price. Do they, like, plot together on how high they wnat to raise the price?


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Re: Simple question: Is one always able to sell a stock? [Re: s240779]
    #19030022 - 10/25/13 08:33 AM (10 years, 3 months ago)

sorry man - got plenty of ideas - just out of them for tonight ;-)
i dont think ppl are plotting agaisnt us, but u never know!! :thumbup:


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Re: Simple question: Is one always able to sell a stock? [Re: s240779]
    #19044846 - 10/28/13 09:36 AM (10 years, 3 months ago)

Quote:

Da2ra said:
I guess if it goes too high, people will have their doubts. So perhaps the mantra should be: buy low, sell medium.




You will likely never buy the absolute bottom and sell the absolute top in any given stock in your lifetime.  This is why risk management strategies are so important, the most common of which include buying an uptrending stock only once it has fallen back close to an established support level (such as its 50 or 200 day moving average), buying only once evidence of other buyers has presented itself, and maintaining an exit strategy most commonly through the use of a trailing stop order (as the security you have purchased increases in value, the level at which you would exit the trade correspondingly increases, thus helping prevent you from giving back too much of your gain in any given stock -- if the security immediately moves against you, you will be sold out of the position at an acceptable loss, so long as you manage your position size and sell stop according to your own personal risk tolerance).


Quote:

Also, do you have any insight into the mechanism by which the price goes up? It just doesn't make any sense to me. Let's say a bunch of random investors are holding shares that they purchased at a low price. Do they, like, plot together on how high they wnat to raise the price?




A stock price is simply the last reported transaction/exchange between a buyer and a seller.  There are two sides to every trade, the buy side (bid) and the sell side (offer).  The area in between these two parties is known as the spread; if buyers are wanting to purchase stock XYZ at up to $99 but sellers are only willing to go as low as $100 to sell their shares, there is a $1 spread, equating to roughly 1% of the stock's aggregate value -- they must meet somewhere in order to execute a transaction, so if a buyer really wants that stock XYZ right here, right now, he'll have to raise his bid up to $100 in order to close the deal.  When buyers are more aggressive (i.e. there is more demand for a stock than there is supply), buyers will increase their bids in order to meet the seller's asking price and obtain as much stock as they want to own.  When sellers are more aggressive (i.e. there is more supply than demand), sellers start lowering their asking price to meet the buyers bid so that they can unload their stock and the price will thus fall.  Market makers help facilitate the flow of trading (availability to buy/sell a particular stock) by "displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds."



So circling back to your original question, "Is one always able to sell a stock?"  The answer is no, however if you buy stocks that are actively traded (i.e. highly liquid), the risk that there will be absolutely zero buyers when you want to sell is very small.  Of course, because of the difference between the bid and the offer (i.e. spread), you may have to accept a lower price than you would prefer to in order to unload your shares, particularly if negative news has just become known on the company, which in turn tends to make buyers more hesitant and sellers more aggressive, thus lowering both bids and offers in order to settle the transaction.  The risk of being unable to sell your stock at an acceptable price is vastly greater when you are trading stocks that lack liquidity, such as penny stocks, because buyers can literally vanish, or one large seller can drive the price down significantly on a percentage basis simply by selling their entire position all at once.


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Re: Simple question: Is one always able to sell a stock? [Re: geokills]
    #19050624 - 10/29/13 06:27 AM (10 years, 3 months ago)

Yeah, so i just read a guy bought 5,000 bitcoin in 2009 for $27. Then he 'just remembered' he had em, and oh wow, 5,000 BTC at $200 each = $1,000,000.  Nice story, but how many of us had $27 and brains 4 years ago?

So - my sharemarket summary is two part... high risk, and low risk.

High risk, invest in a one in a million company with something u r prepared to lose... be it bitcoin, apple, exploratory mining etc... cross your fingers, forget you spent any $, and come back in 5 years time.

Low risk, invest in a real company you know that pays dividends. A lot of the time a dividend pays better than interest on money in the bank, PLUS the share value can appreciate. Regular dividends usually holds the share price at a level... but thats ok. There is a v.small chance they will disappear, and in most cases the shares will appreciate.

:peace::heart::thumbup:
Vort


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Re: Simple question: Is one always able to sell a stock? [Re: Vort]
    #19064493 - 10/31/13 04:42 PM (10 years, 2 months ago)

Thank you geokills and Vort. I really appreciate your efforts. I've read your posts and I'll refer them in the future.


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