3 ms·
What is meant here is that if we have a closed room with 100 people. If there are 60 investors who want to sell stocks and 40 who want to buy always equally as
by mewpmewp2 6y ago
What is meant here is that if we have a closed room with 100 people.
If there are 60 investors who want to sell stocks and 40 who want to buy always equally as much for simplification purposes and the price is $50, the price will keep moving down until there's 50 investors who want to sell and 50 investors who want to buy.
40 trades will happen on $50 price, but then there is 20 sellers still left who want to sell at this price. Since there are no buyers, price will go lower and slowly some sellers don't want to sell lower than $50, so there might be 15 sellers left at $45 and 5 buyers, they will do the trade and then there will be 10 sellers left. let's at $40 there will be 5 who decided it's good to buy now and this is where the fair price will have landed, at $40.