How Can This Be

[GEOFFREY]

HI ALL
So in this book it says for every buyer their must be a seller,
for every seller their must be a buyer. Someone somewhere
must buy if you want to sell. Someone somewhere must sell
if you buy. Ok, makes sense, no problem.

Later,in this book it says if their are more buyers than sellers
the market will go up, if their are more sellers than buyers the
market will go down.

As the first statement contradicts the second,

HOW CAN THIS BE?

 

[Skimbleshanks]

Because, certainly for equities, there are Market Makers sitting in the middle.

It is their job to hold sufficient stock to be able to create a market, and they're the ones who alter the bid/ask prices, etc. So when you sell an equity, a Market Maker buys it, and when you buy an equity the Market Maker sells it to you.

However, in electronic markets such as Globex (where there are no Market Makers) then there has to be a buyer matched by a seller.

What your book is also referring to is supply and demand - so when lots of people want to buy a stock the Market Makers bump up the price, and vice versa.

 

[peto]

"However, in electronic markets such as Globex (where there are no Market Makers) then there has to be a buyer matched by a seller. "

So if more people want to buy then they are forced to offer a higher price to tempt sellers, hence the price rises