<p>I will paraphrase the Cambridge English dictionary's <a href="https://dictionary.cambridge.org/dictionary/english/sell-off" rel="nofollow noreferrer">definition</a>: a sale of equity shares that causes its price to fall.</p>
<p>As the question notes, that appears to make little sense, if for every buyer, there is a seller. If stock prices were negotiated by individual verbal contracts, the implication was that the seller was more motivated to sell than the buyer to buy, and so the price had to be adjusted lower.</p>
<p>However, the common usage of “sell off” in the financial press is different: it is a synonym for a stock price (or stock index) experiencing a price fall on a day versus the previous day. The implication is that all the sellers were motivated than buyers, and so the price fell, like in the verbal contract.</p>
<p>However, if the observed price on the exchange is lower, we only know two things:</p>
<ol>
<li>For every buyer, there is a seller.</li>
<li>The price of the transactions on the current day is lower than the previous day.</li>
</ol>
<p>There’s any number of ways the price can end up lower, and short of questioning everyone involved in trading that day, we have no idea what really happened.</p>
<p>I will now give an example how intuition about supply and demand can be misleading.</p>
<p>Imagine that Acme Inc. traded yesterday at \$10. The next day, market makers set the price around that price, with a bid-offer spread. There is no trading.</p>
<p>Then imagine that at 10 am, Acme announces a successful lawsuit against it by the plaintiff Wile E. Coyote. The market makers are shocked, and drop the mid of the bid/offer prices to \$5, and still there is no trading.</p>
<p>Meanwhile, retail stock traders who did not know about the lawsuit saw the new price, and rushed to buy. 100 customers buy 100 shares each for the market makers, who are happy to sell out of inventory.</p>
<p>From the persepctive of an outside observer, we saw 100 retail traders rush to buy shares - and the price fell by half.</p>

CC BY-SA 4.0
2018-02-10T02:24:20.397Z
2021-12-25T23:03:47.763Z
2021-12-25T23:03:47.763Z
Brian Romanchuk
<p>Note that the price can move without any trading at all.  For example , Acme closes on Tuesday night at usd 10.  Overnight, bad news about the stock comes out.  The next morning, it opens at usd 5.</p>
<p>As others have described there could also be a large volume of trading, as a new equilibrium price is established.  In either case, “stocks fell “ is better than “stocks sold off “</p>

CC BY-SA 4.0
2022-01-07T16:28:38.557Z
When stocks appear to close, then open at a drastically different price, don't forget that certain investors and institutions can trade "After Hours".
WakeDemons3
CC BY-SA 4.0
2021-12-26T00:32:30.003Z
2021-12-26T00:32:30.003Z
dm63
<p>I have seen this question asked many times recently and would like to provide an answer. </p>

<p>You are exactly correct that every transaction is "balanced". Every 1 stock bought = 1 stock sold, and vice-versa. Sell-offs (and buying frenzies) are a matter of supply-and-demand.  In a sell-off, the market for a stock is flooded with a supply of sellers, and the price necessarily has to fall to meet the lesser demand. Likewise, in a buying frenzy, the market for a stock is flooded with buyers, and the price necessarily has to increase for the supply of sellers to meet demand. </p>

CC BY-SA 3.0
2018-02-09T17:39:40.053Z
Fundamental valuation can change prices. Bond yields depend upon expectations for monetary policy; those expectations can change in response to data, without any transactions.
Brian Romanchuk
CC BY-SA 3.0
2018-02-09T18:09:38.977Z
Cool. But this question didn't ask "what are all the ways a stock price can change".
WakeDemons3
CC BY-SA 3.0
2018-02-09T18:53:20.150Z
But you are arguing that there is a “flooded with a supply of sellers”: it is entirely possible no such “flood” exists. Everyone just adjusts their price, and life carries on. However, you write “In a sell off...” which implies that your description applies to all sell-offs, whereas it might be only some cases.
Brian Romanchuk
CC BY-SA 3.0
2018-02-09T16:06:25.513Z
2018-02-09T16:12:59.170Z
2018-02-09T16:12:59.170Z
WakeDemons3
<p>If every stock transaction is "balanced" (1 sell = 1 buy), then what does a "sell-off" actually mean and how does it move the price of a stock? </p>

<p>Ex. If millions of people sell a stock, there's necessarily an equal millions of buys of that stock.</p>

<supply-and-demand><stock-market>
What does a "sell-off" mean if every stock transaction is balanced?
WakeDemons3
# What does a "sell-off" mean if every stock transaction is balanced?

(Asked by: username_0 on 2018-02-09)

If every stock transaction is "balanced" (1 sell = 1 buy), then what does a "sell-off" actually mean and how does it move the price of a stock?

Ex. If millions of people sell a stock, there's necessarily an equal millions of buys of that stock.

**Tags:** supply-and-demand, stock-market


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## 3 answers

### Answer by username_1 on 2018-02-10. Score: 1

I will paraphrase the Cambridge English dictionary's [definition](https://dictionary.cambridge.org/dictionary/english/sell-off): a sale of equity shares that causes its price to fall.

As the question notes, that appears to make little sense, if for every buyer, there is a seller. If stock prices were negotiated by individual verbal contracts, the implication was that the seller was more motivated to sell than the buyer to buy, and so the price had to be adjusted lower.

However, the common usage of “sell off” in the financial press is different: it is a synonym for a stock price (or stock index) experiencing a price fall on a day versus the previous day. The implication is that all the sellers were motivated than buyers, and so the price fell, like in the verbal contract.

However, if the observed price on the exchange is lower, we only know two things:

1. For every buyer, there is a seller.
2. The price of the transactions on the current day is lower than the previous day.

There’s any number of ways the price can end up lower, and short of questioning everyone involved in trading that day, we have no idea what really happened.

I will now give an example how intuition about supply and demand can be misleading.

Imagine that Acme Inc. traded yesterday at \$10. The next day, market makers set the price around that price, with a bid-offer spread. There is no trading.

Then imagine that at 10 am, Acme announces a successful lawsuit against it by the plaintiff Wile E. Coyote. The market makers are shocked, and drop the mid of the bid/offer prices to \$5, and still there is no trading.

Meanwhile, retail stock traders who did not know about the lawsuit saw the new price, and rushed to buy. 100 customers buy 100 shares each for the market makers, who are happy to sell out of inventory.

From the persepctive of an outside observer, we saw 100 retail traders rush to buy shares - and the price fell by half.


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### Answer by username_2 on 2021-12-26. Score: 0

Note that the price can move without any trading at all. For example , Acme closes on Tuesday night at usd 10. Overnight, bad news about the stock comes out. The next morning, it opens at usd 5.

As others have described there could also be a large volume of trading, as a new equilibrium price is established. In either case, “stocks fell “ is better than “stocks sold off “

> **Comments:**
> **username_0**: When stocks appear to close, then open at a drastically different price, don't forget that certain investors and institutions can trade "After Hours".  

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### Answer by username_0 on 2018-02-09. Score: 0

I have seen this question asked many times recently and would like to provide an answer.

You are exactly correct that every transaction is "balanced". Every 1 stock bought = 1 stock sold, and vice-versa. Sell-offs (and buying frenzies) are a matter of supply-and-demand. In a sell-off, the market for a stock is flooded with a supply of sellers, and the price necessarily has to fall to meet the lesser demand. Likewise, in a buying frenzy, the market for a stock is flooded with buyers, and the price necessarily has to increase for the supply of sellers to meet demand.

> **Comments:**
> **username_1**: Fundamental valuation can change prices. Bond yields depend upon expectations for monetary policy; those expectations can change in response to data, without any transactions.  
> **username_0**: Cool. But this question didn't ask "what are all the ways a stock price can change".  
> **username_1**: But you are arguing that there is a “flooded with a supply of sellers”: it is entirely possible no such “flood” exists. Everyone just adjusts their price, and life carries on. However, you write “In a sell off...” which implies that your description applies to all sell-offs, whereas it might be only some cases.  

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