One thing I don't quite understand

Discussion in 'Stocks & Derivatives' started by NiGMa46, Mar 16, 2011.

  1. NiGMa46

    NiGMa46 New Member

    Joined:
    Feb 19, 2011
    Messages:
    57
    Likes Received:
    0
    Trophy Points:
    0
    Location:
    Brisbane
    Just a question,

    So when there's mad panic selling of stocks like what we have seen the past few days, who are the shares sold to? Is there always a buyer? If so, what kinda person buys all the way down?

    Not sure how this works, I would imagine there being a lot more people selling than buying...??

    Is there a situation when you can't sell? Does this cause sellers to offer a lower price? And is this the force that drives the price of a share down?

    Obviously a newb to shares. :)
     
  2. SilverSanchez

    SilverSanchez Active Member

    Joined:
    Jan 17, 2011
    Messages:
    2,679
    Likes Received:
    0
    Trophy Points:
    36
    Location:
    Melbourne
    See on the PDN chart? Use the candlestick chart (3 month daily)... notice the gaps between the black candles in the plumit... that represents the gaps between buyers... when you sell 'at market' (your sell at an specific price is called an "offer") you sell to the highest bidder... if there are no bidders.... you cant sell... and your stuck with the shares nobody wants untill somebody wants them, and you will sell at the price they wanted to pay.
     
  3. THUCYDIDES79

    THUCYDIDES79 New Member Silver Stacker

    Joined:
    Sep 1, 2010
    Messages:
    3,606
    Likes Received:
    2
    Trophy Points:
    0
    Location:
    Brisbane/Greenbank
    For every seller there is a buyer.

    Imagine the 'true value' of a commodity/stock/bond pretty much anything traded on a stock exchange is $10

    At that moment and price you will have something like

    BID SIDE OFFER SIDE
    PRICE # OF SHARES PRICE # OF SHARES
    $9.95 100 $10.05 100
    $9.90 200 $10.10 200
    $9.85 300 $10.15 300
    .
    .
    .
    $5.00 20 000 $20.00 20 000


    The lower the price the more shares want to be bought ( assume silver is $35 and u buy $300pm worth, if
    someone were to offer the silver to you at $30 than maybe ud be spending $400pm - conversely if you have a
    huge silver stash that you are selling off to support your lifestyle ( phrase borrowed from RE & stock market stuff ;) )
    than at $35 ud be selling lets say $300pm and at $40 you mite be selling $400pm)


    anyways market participants place their buy and sell orders ( may be specific with number of shares and price ) or
    you may enter AT MARKET and than your order would be filled at the spot price - so from example above
    lets say you want to sell 315 shares AT MARKET.

    you would be instantly filled with 100 shares @ $9.95, than following 200 shares @ $9.90 and remaining 15 shares @ $9.85

    new picture would be ( assuming no new entrants at that point in time - some reasonably thinly traded stock

    buy side sell side

    $9.85 285 shares $10.05 100 shares
    .
    .
    .

    you notice the spread has increased to $0.20 ( diff between highest bid and lowest offer )

    NOW DURING A PANIC - WHEN EVERYONE IS SELLING , there are heaps and heaps of shares offered
    AT MARKET and they have to be filled,
    on the higher prices $10 there are no buyers, none at $9.90 , none at $9.80 and so on until someone is there waiting
    at $6 or something and the price will keep coming down until the SELL orders are filled or until trading is halted.


    roughly speaking thats what happens on a stock-exchange - but i stand to be corrected :)
     

Share This Page