Buying and Selling?

Hi
Please excuse if this is a really really dumb question but,

Am I correct in saying that it is incorrect to say that 'there is a lot of buying (or selling) going on today'?

If a share is bought it equally has to be sold and vice versa.

Is it better to describe it as alot of shares were exchanged?

Thanks

Do,

This is something with which I’ve had a long and heroic struggle (and continue so).

This is my take. It’s a question of how trades affect supply and demand. Assume a market-maker is offering (ie for you to buy) 10,000 shares, and bidding (ie for you to sell) also 10,000 shares. You decide to buy 5000, therefore the m-m has sold you those 5000.

As you say, there is an equal number bought and sold, but for buys this affect only the offer/buying (supply) side, not the bid/selling (demand) side. Therefore, buying only, but not selling.

Note. Buying and selling here is from the customer side, not the m-m side. From the m-m perspective, this is reversed – m-m is selling to the customer on the offer (supply) side, buying from the customer on the bid (demand) side.

Hope that helps.

Grant.

And bear in mind that most derivatives are created out of thin air in response to a demand one way or the other, so in this sense it's valid to speak of them like this.

Arabian,

One of the most difficult concepts to explain to a beginner is that of short-selling, ie selling that which you don’t own. This is would be further complicated when we add your idea and we get selling something you don’t own which doesn’t exist. This is not the financial markets, this is metaphysics.

Grant.

Do said:

Hi
Please excuse if this is a really really dumb question but,

Am I correct in saying that it is incorrect to say that 'there is a lot of buying (or selling) going on today'?

If a share is bought it equally has to be sold and vice versa.

Is it better to describe it as alot of shares were exchanged?

Thanks

Click to expand...

It's not a dumb question, and a great many people don't understand it.

Yes, if a share is bought, it must also be sold, and vice-versa. Otherwise, no transaction has taken place. When one says that "there is a lot of buying going on today", he means that the buying interest or pressure is greater than the selling interest or pressure, i.e., that buyers are willing (sometimes eager, sometimes even desperate) to pay what sellers are asking. This drives prices up. On the opposite side, prices fall when sellers are willing to accept what buyers are offering (if they're not willing to accept it, prices stay right where they are).

Better?

Db

dbphoenix said:

It's not a dumb question, and a great many people don't understand it.

Yes, if a share is bought, it must also be sold, and vice-versa. Otherwise, no transaction has taken place. When one says that "there is a lot of buying going on today", he means that the buying interest or pressure is greater than the selling interest or pressure, i.e., that buyers are willing (sometimes eager, sometimes even desperate) to pay what sellers are asking. This drives prices up. On the opposite side, prices fall when sellers are willing to accept what buyers are offering (if they're not willing to accept it, prices stay right where they are).

Better?

Db

Click to expand...

yeah Better! :cheesy: I read that one when i was studying about the concept of buying and selling.. Nice explanation you got in there

grantx said:

Arabian,

One of the most difficult concepts to explain to a beginner is that of short-selling, ie selling that which you don’t own. This is would be further complicated when we add your idea and we get selling something you don’t own which doesn’t exist. This is not the financial markets, this is metaphysics.

Grant.

Click to expand...

Well perhaps, but it really does happen - compare the open interest on pretty much any popular exchange traded contract at delivery to the cumulative volume... anyway the entire point of a derivative is that it doesn't exist, otherwise it wouldn't be a derivative, right?

Arabian,

Let's also make it otc and off balance-sheet.

Grant.