Does selling a stock make it go down?

A clear, practical guide on whether selling moves a stock’s price: selling can cause prices to fall, but the size, order type, liquidity and information content determine the magnitude and persiste...

2026-01-24 10:39:00

By Crypto Trailblazer

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Does selling a stock make it go down?

Does selling a stock make it go down? Short answer: selling can cause a stock’s price to fall, but whether and how much it falls depends on market mechanics (supply/demand and order-book liquidity), the size and type of the sale, market participants, and whether the sale conveys new information to the market.

This article explains those factors step by step, compares equities and crypto, corrects common misconceptions, cites a recent insider sell example for context, and closes with practical guidance on how to sell with minimal market impact. Readers will learn why some sells move prices a little and others move them a lot — and how to reduce avoidable slippage when trading on exchanges such as Bitget.

Background — how prices are set in markets

At the simplest level, price is the balance of supply and demand. A trade occurs only when a buyer and a seller agree on a price. The quoted bid and ask (and the last traded price) are snapshots of that agreement process.

When more sellers want to sell than buyers want to buy at current prices, price tends to fall until new buyers step in or sellers accept lower prices. Conversely, when more buyers compete for limited shares, price tends to rise. This is the basic supply-and-demand discovery process that underlies why selling can change a quoted price.

Quoted prices are usually expressed as a bid (highest price buyers are willing to pay) and an ask (lowest price sellers are willing to accept). The last price reports the most recent trade. A single large sell that finds willing buyers at lower bids will result in a lower last price — the market moved because the balance between willing buyers and sellers changed.

Market microstructure — orders, liquidity and immediate price impact

Market microstructure is the set of rules, order types and visible order-book liquidity that determine how trades execute and how prices move in the short term.

Order types matter. A market order instructs the exchange to execute immediately at the best available price. A limit order sets a maximum (for buys) or minimum (for sells) price and will only execute at that price or better.

The visible order book shows standing bids and asks and the quantity available at each price level. Market depth refers to how many shares are available near the midprice. The bid-ask spread is the gap between the best bid and best ask. Wider spreads and shallow depth make prices more sensitive to trades.

If you submit a market sell that is larger than the quantity available at the best bid, your order will “walk the book”: it will consume the top bid, then the next, then the next, accepting progressively lower prices until fully filled. That results in slippage — the difference between the expected execution price and the actual average execution price — and produces an immediate downward move in the last price.

A limit sell placed at or above the current ask may sit in the book until a buyer lifts it; that action by itself does not move the price unless it gets executed. The immediate downward price impact of a sale therefore depends on whether the sale consumes bids (market sell) or is posted to the ask (limit sell) and on the available depth at each price level.

Size matters — small retail sells vs large institutional sells

Does selling a stock make it go down in every case? No — size relative to liquidity is crucial.

For very liquid, large-cap stocks with deep order books and tight spreads, a small retail-sized sell order often has negligible impact. The available bids can absorb the order without moving the last traded price much.

Large block sells, however, can cause significant short-term declines if they are big relative to the available depth. Institutional sellers who need to liquidate millions of dollars of shares risk consuming multiple price levels and producing a visible price drop.

Two common effects from large sells: slippage and temporary price pressure. Slippage is the immediate execution cost from walking the book. Temporary price pressure occurs when the price falls due to the sale but later partially recovers as liquidity providers and buyers step in. In some cases, a portion of the price decline is permanent if the sale conveys information about fundamentals.

Large-scale events — sell-offs and panic selling

A sell-off occurs when many holders sell in a short period, outpacing the pool of available buyers. Panic selling is an extreme, emotionally driven sell-off where fear accelerates exits.

Triggers include disappointing earnings, regulatory shocks, macroeconomic events, or contagion from other assets or sectors. Once selling accelerates, feedback loops can worsen declines: falling prices trigger stop-loss orders, margin calls, and algorithmic selling, which in turn push prices lower and invite more selling.

During a rapid sell-off, even liquid stocks can see sharp intraday drops because buyers withdraw or demand a steep discount to absorb risk. Circuit breakers and trading halts in regulated equity markets are designed to slow these loops, giving participants time to reassess and restore liquidity.

Behavioral drivers and trading patterns

Investor behavior shapes when and why selling happens, which in turn affects price moves. Several documented behavioral patterns matter:

Disposition effect: Many investors are reluctant to realize losses and quick to lock in gains. This can create asymmetries in selling pressure across winners and losers.
Tax-motivated selling: Near fiscal deadlines, some holders sell positions for tax reasons, increasing supply irrespective of fundamentals.
Herd behavior: Investors may follow others, creating clustering of sells that amplifies declines.

Research by Odean and others shows how these behavioral biases can create predictable patterns in flows and returns. When many investors act similarly, sells can cluster and push prices down more than a single rational seller would cause.

Information vs liquidity effects — temporary vs permanent price changes

A key distinction: is a price move caused by liquidity mechanics or by information?

Liquidity-driven moves are often temporary. If a large seller is simply reallocating or liquidating for non-fundamental reasons, the immediate price may fall (liquidity effect) but recover as other participants buy the dip.

Information-driven moves are more likely to be permanent. If selling reveals new negative information — for example, insiders selling because they foresee weaker performance — the market may repricedowns that persist.

Over time, markets try to separate informed selling from uninformed or forced selling. Empirical literature finds that some portion of price moves following heavy selling reverts (liquidity effect), while other portions reflect fundamental repricing (information effect). The relative size of these components determines longer-term returns after a sale.

Market participants and mechanisms that moderate impact

Several participants and tools help absorb or hide large sells, reducing visible price impact:

Market makers and high-frequency liquidity providers post bids and offers to capture spread and reduce volatility. They can provide short-term liquidity when sells arrive.
Dark pools and block-trade venues allow large trades to execute off the public order book to avoid moving the visible price.
Execution algorithms (VWAP, TWAP, percentage-of-volume) and iceberg orders split large orders into smaller child orders to reduce slippage and signaling risk.

Using these mechanisms, large sellers can reduce immediate price moves. For example, algorithms that slice a block sell over several trading intervals minimize walking the visible book and mask intent from other participants.

If you trade on an exchange, consider venue liquidity and the presence of professional market makers. For crypto assets, also consider venue fragmentation (see the crypto section below). When using wallets or custody services, Bitget Wallet and Bitget trading features can integrate algorithmic order types to better manage execution risk.

Differences between equities and cryptocurrencies

Equities and cryptocurrencies differ in ways that affect how much selling moves price.

Equities:

Trade on regulated exchanges with designated market makers, standard settlement cycles, and circuit breakers.
Many large-cap stocks have deep order books, reducing the impact of small sales.
Trading hours are limited, concentrating liquidity and often offering higher depth during core hours.

Cryptocurrencies:

Trade 24/7 across many venues with varying levels of regulation and liquidity.
Order books on smaller exchanges or for less popular tokens are often thin; identical sell sizes can produce much larger visible price moves.
Cross-exchange fragmentation means liquidity is dispersed; a large sell on one venue can move the local price more than the global fair value.

Because of these differences, the same sell size can have a modest effect in a blue-chip equity and a large effect in a thinly traded crypto token. Traders selling sizeable crypto positions often use algorithmic execution, OTC desks, or wide venue sampling to reduce market impact. Bitget provides features tailored to token liquidity management and execution that can help reduce slippage for larger trades.

Common misconceptions

Misconception: Any sale automatically lowers the stock’s price. Reality: A sale needs a counterparty. If someone sells and another buyer steps in at the same or higher price, the sale itself does not force a price decline.
Misconception: Selling is always bad for remaining holders. Reality: Context matters. Informed selling based on worsening fundamentals can be a bad signal. Forced selling (taxes, rebalancing) may push prices down temporarily but not change the company’s fundamentals.
Misconception: Insider sells always signal trouble. Reality: Insiders sell for many reasons: diversification, taxes, option exercises, or personal needs. While clusters of insider sales can be informative, a single disclosed sale is not definitive about future fundamentals.

Practical guidance for investors and traders

Choose order type with purpose: Use limit orders to control execution price, market orders only when immediacy matters and liquidity is sufficient.
Size and timing: Break large sells into smaller child orders or use execution algorithms (VWAP/TWAP) to reduce visible impact and slippage.
Use alternative venues: For large equity trades, consider block trades or broker-assisted execution. For crypto, consider OTC or spreading orders across reputable venues.
Watch liquidity metrics: Monitor average daily volume, order-book depth near the midprice, and bid-ask spread to gauge likely impact.
Consider tax and behavioral drivers: Plan sells around tax events and be mindful of emotional biases which can lead to poor execution.
Leverage professional tools: Exchanges and platforms that provide algorithmic execution and access to liquidity providers can materially reduce market impact. Bitget’s trading features and Bitget Wallet can help retail and professional users access execution tools and liquidity services.

None of the above is investment advice. These are practical execution considerations to manage market impact.

Illustrative examples and historical episodes

Real-world episodes help illustrate the mechanics described above.

Company-specific sell-off after bad earnings: When a company reports much weaker guidance, many holders may rush to sell. The immediate weakness often consumes available bids and results in a sharp drop in the last price. Over subsequent days and weeks, the market either re-evaluates fundamentals (permanent move) or recovers as some sellers are exhausted (temporary move).
Sector-wide or market-wide panic: In crises, many assets can suffer correlated selling. During sell-offs, stop-loss cascades, margin calls, and reduced market-making widen spreads and thin depth, dramatically increasing the impact of sells.
Insider sales as a case study: As of 2026-01-22, according to Benzinga, Roger E. Susi, CEO at iRadimed (NASDAQ: IRMD), reported an insider sale of 5,000 shares valued at $509,224 in a Form 4 filing. On the following trading session, iRadimed’s shares were reported at $103.22, up 0.12% in morning trade.

That single insider sale illustrates several points: the sale size and value are quantifiable; the market price move was small on that morning snapshot; and insider sells do not automatically produce lasting price declines. Contextual company metrics (reported revenue growth of 15.69% as of 30 September 2025, gross margin of 77.8%, EPS of 0.44, P/E of 62.5, P/S of 16.45, and EV/EBITDA of 48.59) provide background on why the market may not have reacted strongly at that time.

As always, insider transactions are one data point among many. The SEC Form 4 and regulatory disclosures make such trades public, but they do not by themselves prove a change in fundamentals.

Information from academic and practitioner research

Empirical research supports the distinctions above. Studies on market microstructure document how order-book depth and spread predict immediate price impact. Behavioral finance research (including work by Terrance Odean and later reviews) documents phenomena like the disposition effect that influence when investors sell and how that aggregates.

Research on the permanence of price moves shows that part of the impact from large trades reverses as liquidity returns, while part persists when trades convey new information. The balance between these outcomes is a central topic in the literature on price formation and market impact.

Summary and takeaways

Selling can make a stock go down if the sale changes the local balance of buyers and sellers or consumes available bids in the book. Whether the move is small and temporary or large and persistent depends on:

Order type (market vs limit) and execution method
Size relative to market depth and average volume
Presence of liquidity providers and trading venues
Whether selling conveys new information about fundamentals
Behavioral clustering of sellers (panic, tax selling, herd behavior)
Market structure (regulated equities vs fragmented crypto markets)

If you plan to sell a larger position, consider staged execution, algorithmic slicing, alternative venues or broker assistance. For crypto, be extra mindful of venue liquidity and fragmentation. Bitget offers professional execution tools and Bitget Wallet integrations to help manage trade execution and custody.