The Auction Process

Imagine a local market where people buy and sell fruits. Let's say apples are priced at $1 per apple. If buyers think this is a good price, they'll buy a lot of apples. But if buyers think the price is too low, even more people will rush to buy apples, causing a shortage. So, the apple sellers raise the price to $2 per apple. If the price gets too high, people will stop buying apples because they think it's too expensive. The price is then reduced until buyers are interested again.

Now, let's apply this to the stock market.

Stock prices are like the price of apples. They move up and down based on what buyers and sellers think is a good price, just like at the fruit market. If a stock price is low, buyers will rush in because they see a good deal, which increases the price. But if the price gets too high, buyers will stop buying and might even start selling their stock, which makes the price go down. Sometimes, the price has to go up slightly (through the "resistance level") before sellers think it's a good time to sell. Other times, the price has to go down slightly (through the "support level") before buyers think it's a good time to buy.

So just like the fruit market, the stock market is always trying to find the "right" price that buyers and sellers agree on. This is the basic idea behind how prices move in the stock market.