4 ms·

> more buyers than sellers lead to rising prices and more sellers than buyers lead to falling prices That's not how any of this works. Every share bought is a

by ctlby 8y ago

> more buyers than sellers lead to rising prices and more sellers than buyers lead to falling prices That's not how any of this works. Every share bought is a share sold by some counterparty. Buyers and sellers are always in equilibrium.

module0000 8y ago
The person you're replying to is telling you the truth - imbalanced delta for buyers or sellers means rising or falling prices. There is no magical equilibrium, and if there was, there would be no profit. To explain it a step further... at this moment in time, every private and institutional investors stopped selling APPL...I can still buy a share, likely thousands of them... from the market participants that are always there: market makers. When you make a "bad call"(like selling into a rally), a market maker is likely on the other end of your trade, and they will profit from your "bad call". Now the inverse also applies, often times a market maker is taking the other end of your trade that is a good(profitable) trade for you. The market maker isn't losing though, they are just playing the odds. They are convicted that for every losing trade they take out of obligation(as a market maker), they are going to take 2 or more winning trades. They also operate with trade costs much lower than you or I(ie retail investors) have access to. That was more reply than I originally intended to write...but you have to understand this(or fail at profitable trading). There is no equilibrium, and there are parties(market makers) ensuring that there never will be. That is their job, to create a state of constant liquidity, even if buyers and/or sellers individually are unwilling to play.
- ctlby 8y ago
  > There is no magical equilibrium Your understanding is exactly backwards. Market makers provide the "magical equilibrium" by bridging supply and demand across time. > and if there was, there would be no profit. Wrong again. Even with infinite shares on the bid/ask, there's still a spread for market makers to collect. More generally, what exactly do you think your comment proves? If a retail investor buys the sole 100 shares at top-of-book, the price (mid) moves up, but there's one buyer and one seller. Where's the "delta"? And if a big hedge fund buys 100,000 shares from 10 market makers... 100,000 shares demanded and 100,000 shares supplied. Magic! You're arguing against an accounting identity. I know what you're trying to say: what moves prices is relative eagerness of buyers and sellers. You're just too inexperienced to be able to explain it.
ironSkillet 8y ago
The "market" is more complex than a single stream of matching buy and sell orders at specific price levels. For any given asset, there is an "order book" containing the quantities market participants are willing to buy/sell at various price levels. Lots of people coming in to buy at "the market price" eats away at the selling side of the order book, raising the market price level.
- ctlby 8y ago
  Perhaps buyers nibble at the ask. Perhaps a big order slams through. Or perhaps the posted liquidity is canceled without any trading having happened. Whatever the case, the number of shares sold is exactly equal to the number of shares bought.
jm__87 8y ago
Yes, perhaps I should have chose my words more carefully. When more people want to buy than sell, prices rise. When more people want to sell than buy, prices fall. The exact details of how this happens vary from market to market but in general this is how it works. For every trade there has to be a buyer and a seller. The imbalances occur in the buy and sell orders.
- ctlby 8y ago
  But to a first approximation, the numbers are the same! If anything, some of the biggest moves happen when a single (big) buyer or seller is active. It’s all about the prices participants are willing to trade at, not an imbalance of one group vs another.
  - jm__87 8y ago
    I would think it depends on what scale you're looking at. It is pretty obvious that if one guy takes out a large chunk of the order book of one security, over the course of seconds, on only one side of the market, the price is going to move. If we're talking about the S&P 500 dropping over the course of a few months, I think it is accurate to say that those who want to sell are outnumbering those who want to buy.

by ctlby 8y ago

module0000 8y ago

The person you're replying to is telling you the truth - imbalanced delta for buyers or sellers means rising or falling prices. There is no magical equilibrium, and if there was, there would be no profit. To explain it a step further... at this moment in time, every private and institutional investors stopped selling APPL...I can still buy a share, likely thousands of them... from the market participants that are always there: market makers. When you make a "bad call"(like selling into a rally), a market maker is likely on the other end of your trade, and they will profit from your "bad call". Now the inverse also applies, often times a market maker is taking the other end of your trade that is a good(profitable) trade for you. The market maker isn't losing though, they are just playing the odds. They are convicted that for every losing trade they take out of obligation(as a market maker), they are going to take 2 or more winning trades. They also operate with trade costs much lower than you or I(ie retail investors) have access to. That was more reply than I originally intended to write...but you have to understand this(or fail at profitable trading). There is no equilibrium, and there are parties(market makers) ensuring that there never will be. That is their job, to create a state of constant liquidity, even if buyers and/or sellers individually are unwilling to play.

ctlby 8y ago
> There is no magical equilibrium Your understanding is exactly backwards. Market makers provide the "magical equilibrium" by bridging supply and demand across time. > and if there was, there would be no profit. Wrong again. Even with infinite shares on the bid/ask, there's still a spread for market makers to collect. More generally, what exactly do you think your comment proves? If a retail investor buys the sole 100 shares at top-of-book, the price (mid) moves up, but there's one buyer and one seller. Where's the "delta"? And if a big hedge fund buys 100,000 shares from 10 market makers... 100,000 shares demanded and 100,000 shares supplied. Magic! You're arguing against an accounting identity. I know what you're trying to say: what moves prices is relative eagerness of buyers and sellers. You're just too inexperienced to be able to explain it.

ironSkillet 8y ago

The "market" is more complex than a single stream of matching buy and sell orders at specific price levels. For any given asset, there is an "order book" containing the quantities market participants are willing to buy/sell at various price levels. Lots of people coming in to buy at "the market price" eats away at the selling side of the order book, raising the market price level.

ctlby 8y ago
Perhaps buyers nibble at the ask. Perhaps a big order slams through. Or perhaps the posted liquidity is canceled without any trading having happened. Whatever the case, the number of shares sold is exactly equal to the number of shares bought.

jm__87 8y ago

Yes, perhaps I should have chose my words more carefully. When more people want to buy than sell, prices rise. When more people want to sell than buy, prices fall. The exact details of how this happens vary from market to market but in general this is how it works. For every trade there has to be a buyer and a seller. The imbalances occur in the buy and sell orders.

ctlby 8y ago
But to a first approximation, the numbers are the same! If anything, some of the biggest moves happen when a single (big) buyer or seller is active. It’s all about the prices participants are willing to trade at, not an imbalance of one group vs another.
- jm__87 8y ago
  I would think it depends on what scale you're looking at. It is pretty obvious that if one guy takes out a large chunk of the order book of one security, over the course of seconds, on only one side of the market, the price is going to move. If we're talking about the S&P 500 dropping over the course of a few months, I think it is accurate to say that those who want to sell are outnumbering those who want to buy.