Who decides that a share is worth ₹1,040 today and not ₹1,000? The surprising answer: nobody. The price is decided every second by a silent tug-of-war between buyers and sellers. This is for learning only.
It's just demand and supply
- If more people want to buy than sell, the price gets pushed up.
- If more want to sell than buy, the price drifts down.
That's the whole engine. A "price" is simply the point where a buyer and a seller agree to trade right now.
The order book — the heart of it
Every stock has an order book: a live list of buy orders (called bids) and sell orders (called asks). Say the book for a stock looks like this:
| Buyers (bids) | Sellers (asks) |
|---|---|
| 200 shares @ ₹99.90 | 150 shares @ ₹100.10 |
| 500 shares @ ₹99.80 | 300 shares @ ₹100.20 |
The highest bid is ₹99.90; the lowest ask is ₹100.10. The gap between them is the spread. A trade happens the moment a buyer agrees to pay ₹100.10 (or a seller agrees to take ₹99.90). That traded price becomes the new Last Traded Price you see on screen — and the book instantly reshuffles.
Why prices jump around
Prices move when the balance of buyers and sellers changes — and that happens on news:
- Good results, a big order win, or an upgrade → more buyers → price up.
- Weak results, bad news, or heavy selling by big funds → more sellers → price down.
To stop wild swings, exchanges set circuit limits — a stock can only move a fixed percentage (say 5%, 10% or 20%) in a day before trading pauses.
What this means for you
- The "price" is a crowd's opinion, not a measure of true worth. Crowds can be too excited or too fearful.
- That gap — between price and value — is exactly where patient investors find opportunity.
So when a share falls, don't ask "why is it down?" first. Ask "has the business changed, or just the mood?" Telling those two apart is most of the game.
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