Why does price move?
Market Basics — Lesson 2 of 5 · 5 min read
Every price move in the world, however complicated it looks, comes down to one cause: an imbalance between those who want to buy and those who want to sell. There is no second cause. News, rates, wars and reports do not move price directly — they move people’s intentions, which move their orders, which move price.
How it actually happens
At any instant the market holds queues of orders: buyers ready to buy at certain prices, sellers ready to sell at certain prices. The price you see on screen is simply the last price at which a trade occurred.
If a large buyer arrives and wants to buy immediately, they will consume the sell orders available at the current price. When those run out, they move to the higher-priced orders — and so price climbs. Falling is the exact mirror: an urgent seller uses up the available buy orders, so price drops looking for a buyer.
This is why price falls faster than it rises in many markets: fear pushes everyone to sell at once, buy orders disappear, and price drops into a vacuum. A rally, by contrast, needs sustained buying that builds itself gradually.
Where does the desire to buy or sell come from?
- Interest rates — a currency whose rate rises attracts money, so demand for it grows.
- Economic data — inflation, jobs and growth change investors’ expectations about the economy’s future.
- Real supply and demand — an OPEC decision to cut output shrinks the supply of oil.
- Political risk — wars and crises push money into gold, the dollar and the franc.
- Company performance — earnings above expectations lift a share; losses sink it.
- Crowd psychology — greed and fear amplify all of the above.
Why does price sometimes fall on good news?
This baffles beginners. The answer is that the market prices the expectation, not the event. If everyone expects excellent earnings from a company, people have already bought the share and its price has risen ahead of the news. So when the earnings come in excellent as expected, no new buyer is left — instead, those who bought early sell to bank their profit, and the share falls despite the good news.
The rule traders repeat: buy the rumour, sell the news.
What this means for you in practice
Do not ask “why did price move?” after it has moved — an explanation is always available afterwards and never helps you. Ask instead: where is a likely imbalance? Where did buyers previously cluster? Where did sellers stop? That is exactly what technical analysis tries to answer, and what the STD indicator tracks by tying price behaviour to volume.