Introduction: Why Do Stock Prices Move Every Second?

If you’ve ever watched NEPSE’s price chart or TMS in real time, you’ve seen prices moving every second sometimes even multiple times in a single second. A stock that was Rs. 450 becomes Rs. 452 then Rs. 451 then suddenly Rs. 458.

• Many new investors ask:
  “Why do stock prices keep changing like this?”
  “Who is pushing the price up and down?”

The answer is surprisingly simple: demand and supply.

Yet behind this simple explanation lies a complex system of human psychology, trading algorithms, operator activity, and order-book dynamics. Prices don’t change randomly they move because buyers and sellers constantly adjust what they are willing to pay or accept.

In this blog, you’ll learn exactly how demand and supply drive second-by-second price movements in NEPSE, including:

• How buy and sell orders determine price

• Why even small trades move the market

• How market depth and order books work

• The psychology behind demand and supply

• NEPSE-specific factors like low liquidity and operator influence

• How traders can use this knowledge to make smarter decisions

Let’s break it down clearly and simply.

1. The Core Principle: Demand & Supply Control Everything

Every stock trade happens only when:

• A buyer agrees to the price a seller is asking, or

• A seller agrees to the price a buyer is bidding

This intersection is what creates a transaction.

1.1 What is Demand?

Demand is the number of buyers who want to buy the stock at different price levels.

More demand = more buyers = price goes up.

1.2 What is Supply?

Supply is the number of sellers who want to sell the stock at different price levels.

More supply = more sellers = price goes down.

1.3 Why This Makes Prices Move Every Second

Each time a buyer or seller places a new order or cancels an order, the balance changes. This creates new price levels and the price moves. NEPSE updates this thousands of times per minute.

2. How Order Books Create Price Movement

NEPSE uses a central limit order book (CLOB). This book contains:

• Buy Orders (Bids)

• Sell Orders (Asks)

2.1 Example Snapshot of Order Book

Here’s what happens:

• If a buyer buys at 491 → price jumps to 491

• If a seller dumps shares at 489 → price falls to 489

Every executed order updates the price.

2.2 Why Low Liquidity Stocks Move Faster

Small orders move low-cap and microfinance stocks quickly because:

• Few buyers and sellers exist

• Even 100 shares can shift the price by multiple levels

This is why microfinance stocks often move sharply in NEPSE.

3. How Operators and Big Investors Move Prices

Demand and supply aren’t always natural. Sometimes, big players influence them.

3.1 Operator Strategy: Create Fake Demand or Supply

Operators may:

• Place large buy orders to push price up

• Place large sell orders to scare retail investors

• Cancel orders at the last second to manipulate sentiment

This is called spoofing, and while illegal in many markets, regulators in Nepal have weaker surveillance, making operator influence significant.

3.2 Why Retail Investors Get Trapped

Retail investors react emotionally to sudden movements:

• Price rises → they chase

• Price falls → they panic sell

This adds sudden demand or supply, moving prices rapidly.

4. The Human Psychology Behind Demand & Supply

The market is driven by human decisions, not just numbers.

4.1 Fear of Missing Out (FOMO)

When a stock suddenly rises, buyers rush in due to greed → demand increases → price jumps.

4.2 Fear of Loss (Panic Selling)

If a stock falls a bit, retail investors panic and sell → supply increases → price drops.

4.3 Herd Behavior

Investors copy what others are doing, creating sudden surges or crashes.

5. Why Prices Move Every Second in NEPSE

5.1 New Buy or Sell Orders Enter

Every new order changes the demand-supply balance.

5.2 Order Cancellations

If someone cancels a big buy order, demand instantly drops → price can fall.

5.3 Market Depth Gets Consumed

When a buyer consumes all available ask orders, price jumps to the next level.

5.4 Big Orders Get Split Into Many Trades

Even a single investor buying 10,000 shares gets executed in chunks, moving the price each time.

6. NEPSE-Specific Reasons Prices Move Frequently

6.1 Low Liquidity in Many Stocks

In many NEPSE stocks:

• Fewer shares are available for trading

• A small order can move the price significantly

6.2 Limited Number of Active Traders

Few active buyers and sellers mean:

• Thin order books

• Bigger price fluctuations

6.3 High Retail Participation

Retail investors are emotional, which increases volatility.

6.4 Rumors, News & Operator Effects

Nepali investors react heavily to:

• News

• Rumors

• Social media posts

7. How Pre-Open and Closing Auctions Create Large Movements

NEPSE uses auction mechanisms at:

• Market open (pre-open)

• Market close (closing auction)

These periods aggregate buy and sell orders.

7.1 Why Big Gap Ups or Gap Downs Happen

If demand > supply → opening price jumps
If supply > demand → price falls sharply at open

Retail investors often misinterpret these gaps.

8. Real-Life Example: Why a Stock Jumped Suddenly

Let’s examine a simplified scenario:

Before:

• Buyers willing to pay 450

• Sellers asking 451

Suddenly, a big buyer places a market order for 5,000 shares.

Order book gets consumed:

• 451 (200 shares) → filled

• 452 (300 shares) → filled

• 453 (500 shares) → filled

• 455 (3,000 shares) → filled

Final price = Rs. 455
Price moved five points in seconds because of one big order.

9. How Traders Can Use Demand & Supply Knowledge to Their Advantage

9.1 Check Market Depth Before Entering

Market depth shows demand and supply at every level.

• High demand → price may rise

• High supply → price may fall

9.2 Avoid Placing Market Orders in Illiquid Stocks

Market orders can cause huge losses if order-book depth is low.

9.3 Enter Gradually, Not All at Once

Break large orders into smaller chunks to avoid slippage.

9.4 Use Support and Resistance Levels

Demand is stronger at support levels.
Supply is stronger at resistance levels.

9.5 Understand Psychological Triggers

News, rumors, and social media strongly affect demand-supply in Nepal.

10. Common Misconceptions Retail Investors Have

❌ “Brokers change the price manually.”

→ No. Price changes only through buy/sell orders.

❌ “NEPSE itself manipulates prices.”

→ NEPSE only matches orders; traders create the demand and supply.

❌ “It’s all luck.”

→ Price movement follows clear demand-supply rules.

❌ “Sell if it moves down suddenly.”

→ Could be a temporary imbalance, not a trend.

11. When Demand & Supply Fail to Explain Price Moves

Sometimes prices move due to:

• Insider information

• Corporate announcements

• Dividend or bonus expectations

• New regulations

• Sector rotations

• Operator-led pump and dumps

Demand and supply still determine the price, but these factors influence them.

12. Summary: Why Stock Prices Move Every Second

Key points to remember:

1. Stock prices change because of constant demand and supply shifts.

2. Buyers and sellers place new orders every second.

3. Order book dynamics cause rapid price changes.

4. Market depth determines how fast a stock moves.

5. Retail emotions and operator strategies add volatility.

6. NEPSE’s low liquidity amplifies price swings.

7. Understanding demand and supply helps you avoid emotional mistakes.

Conclusion: Master Demand & Supply to Master the Market

The stock market is not magic, guesswork, or luck.
Every price tick whether in NEPSE or global markets is the result of a real-time negotiation between buyers and sellers.

Once you understand:

• How order books work

• How demand and supply shift

• How psychology drives trades

You will stop being confused by sudden price changes.
You will stop blaming brokers or “manipulation.”
You will start making calm, confident, strategic decisions.

The more you understand demand & supply, the more profitable your trading becomes.