I’ve seen many questions on what Sell Walls are but I haven’t seen a good explanation on them. Scroll down for the Explain Like I’m A 4th Grader (ELI4G).
Sell Walls are used to move the price down. They create an impression of a strong supply, which makes some people, unwilling to wait for the wall to break down, sell their shares below the sell wall price.
For example, let’s say GME is on a run up from $190.00 headed to above $200.00 quick. Suddenly a 50,000 share wall appears at $200.00. People who want to sell their shares see this big wall. They believe that the current buying pressure will not be able to break this wall down, so they assume it is the current peak. So to sell their shares they will set a limit sell order at $199.50. This brings the sell price down to $199.50.
The goal of the sell wall is to move the price, not to actually sell the 50,000 shares at that price. So when the price gets too close, the wall disappears or moves to a higher price (we see this happen many many times a day with GME). A quick way to tell if this is happening is if you see the same amount of shares popping up at different prices.
What we see happening on GME is all done by algorithms. That’s why you can see Buy Walls on the other side. Algorithms are battling algorithms for control of the price as well as finding the most advantageous price to buy or sell. It’s a form of Market Manipulation but this form is completely legal.
ELI4G: Jimmy wants a PS5 but he can’t buy it until he gets paid tomorrow and scalpers are driving the price up over the $500 he can afford. So, Jimmy places an advertisement on EBay that he has 10,000 PS5’s for sale at $500. Jimmy does not have 10,000 PS5’s and of the price gets to $499.90 he will remove his ad and replace it for $501.00. The scalpers see the ad for $500 and place their PS5’s for sell at $495 to sell their PS5 first. Other scalpers see the $495 and lower their price. This goes on until the price settles at $420. Jimmy is able to buy his PS5 and an extra game now!