In this concise educational video, Sean Twizer and Speaker A explain how stock prices are set through the forces of supply and demand. They begin with a real‑world analogy of a limited‑edition Yeezy shoe drop, showing how scarcity (low supply) and high desire (high demand) push secondary‑market prices up, while a sudden flood of additional shoes (high supply) drives prices down. Translating this to the stock market, they describe the bid‑ask mechanism, emphasizing that a transaction requires a buyer and a seller to agree on price and quantity. They discuss how abundant buying interest raises demand and lifts prices, whereas abundant selling interest increases supply and pushes prices lower. The concept of equilibrium—where buyers and sellers agree on a price—is introduced but noted as rarely sustained in practice. The speakers also explore the psychology of market participants: sellers aim for the highest price, buyers aim for the lowest, creating a constant tug‑of‑war that determines price movements. They highlight the usefulness of monitoring the level‑2 order book to gauge the depth of bids and asks, and conclude that understanding these supply‑demand dynamics can lead to more profitable trading decisions.
Who makes the prices in the stock market and how are they set up? Supply and demand. You probably heard about the concept, but you never fully understood it and how the stock price is actually determined by those. So I'm going to give you an example outside of the stock market.
The best example I can give you from the real world is the Yeezy drop. If you're not familiar with Yeezy, the brand, it's a shoe brand created by Kanye West and it's mainly driven by hype. Now let's say today Kanye West releases a new pair of shoes and it's a limited drop of only 500 pieces. And because we know a guy that knows a guy, we managed to score 5 pairs of shoes at retail price. Now, after the drop finishes and there is only supply of 500 shoes, we can expect people that wanted to buy the shoe at retail price to be willing to pay more in the secondary market. That is because they want it and the supply is limited to only 500 pairs. The more that people will want to buy the shoe, the more they will be willing to pay and push each other to pay more. Think of it like an auction, basically. Now, because Kanye West is a little bit cuckoo, he may decide tomorrow to release 500,000 more pairs of shoes. This will create a lot of supply, right? And demand will probably go down, as if you will want to get the shoe, you will be able to get it at retail price. Meaning that people will not pay above retail price again because the supply is really high. So basically, when we have a lot of demand and a little bit of supply, the prices go up, and when we have a lot of supply and not that much demand, the price tends to go down. Another thing we need to take into consideration is the amount of money and willingness of these buyers or sellers to sell. If, for example, we bought all the 500 pairs of shoes and Kanye West decided to release a lot more pairs of shoes and we don't want to get stuck with 500 pairs of shoes, we might be even willing to sell for a loss. And if we managed to score all the 500 pairs and Kanye does not release anything else, this now becomes a collectible and we can charge a lot of money for it, making a nice fat bag. This is a real-world example of trading outside the stock market. Everything in this world is driven by supply and demand, which is the amount of people and how much they are willing to pay and/or sell a specific product.
Same goes in the stock market. To make a transaction, we need both parties, the bid and the ask, or the buyer and the seller, to agree. They need to agree on the quantity and the price of the stock. One sells the shares and one buys them. As a rule of thumb, if a lot of people are willing to buy the stock, the demand goes up and so does the price. If a lot of sellers are willing to sell the stock, the supply goes up, which means the stock price will probably go down as this will create pressure and a lot of people will start undercutting each other. There is another situation which is called equilibrium, and that is when buyers and sellers agree at the same price and the stock price does not move. But this doesn't actually happened, so it's not that important. Now let's understand the mentality and the forces within the market. If you're a seller, you're going to want to sell the stock as high as possible, and if you're a buyer, you're going to want to buy it as low as possible, right? This tug of war between the buyers and the sellers is what determines the stock price. Keeping an eye on the bid and ask and the level 2 table helps us understand the current status of buyers and sellers. Think about it for a second. If we know a lot of people want to sell their stock at $90, we're going to sell below that, right? Because we know it's going to be a hard place to sell our stock at. And if we want to buy the stock but we see there is a big support and a big bid, meaning a lot of people are willing to buy the stock at $90, we're going to buy it a little bit beforehand at the higher price. That is, of course, if we want to get So in summary, the price of a stock is determined by the constant war between buyers and sellers and the tug of war between them. Supply basically means the amount of shares that people are willing to sell, and demand is the amount of people that are willing to buy the stock. Of course, we're talking about quantities of shares and not the amount of people, but you get the point. Understanding these dynamics makes us make better decisions and be more profitable.
