When there is a big stock market sell off who are the buyers?
That's the part I don't understand. If the market sells off broadly aren't there equal numbers of buyers?
- A.J.Lv 71 month agoFavorite Answer
It is better to understand what occurs.
Each transaction has a seller and buyer at a price.
The buyer wants to pay the least possible.
The seller wants the highest possible price.
When the highest minimum buy meets the lowest sell it is matched to become a transaction. The "market price" is the last transaction, or the lowest seller minimum offer for the buyer, or the highest buyer maximum for the seller.
When a lot of shares are traded in many transactions, you can track the price move.
An order to a broker can be placed as LIMIT or MARKET.
The seller can set a minimum and buyer can set a maximum as they put in the order.
The broker, or computer in matching, does the best it can based on open orders.
A MARKET order trades immediately to what is available.
A LIMIT order may sit waiting for a buyer or seller to offer the price desired.
Once this is understood, the question's answer gets easy.
Stock sell off = More shares offered for sale pushing the price lower as matched to buyer's offers to buy. We don't have to say "equal number of buyers/sellers" but rather number of shares because one buyer or seller can offer many shares to match to multiple buyers or sellers. Each transaction is unique as a number of shares at a price. There is a buyer and seller in each transaction but could be the same buyer or seller for many transactions.
Suppose I want to sell 10,000 shares of stock at market.
One buyer may want 1000 shares at $50. The next highest buyer may offer $49.50 for 500 shares. The next buyer may offer $49 for 5000 shares. The next available buyer may offer $48 for 500 shares. Maybe another order for 1000 shares placed instantly at market and sells at $48. The price keeps falling until the order fills.
If the seller said limit $48, maybe only a partial fill occurs, and other orders to sell match to the next highest buyer acceptable price.
Again, for a transaction to occur, there must be a buyer and seller at an agreed upon price, but more shares to sell than buyer's offer to buy them pushes the price down until it is low enough for a buyer, and can drop to worthless.
- FLv 61 month ago
Big buyers are hedge funds. Don't ask me how it works. If I did I would be making millions with them.
- Nuff SedLv 71 month ago
It's not just the number of buyers -- it's the price they're willing to pay, as a weaker market (for stocks) is not as valuable as it was even a few days ago.
If you have a million shares that nobody wants to buy at $10, you see how many you can sell at $9, and so forth.
- Anonymous1 month ago
I started picking at some stocks today, been waiting for a sell off so this is it. If you aren't planning on selling anyways in the next several years, its not that big of a deal. I still have quite a few stocks now that I bought in 2008/9 when financial collapse was occuring.
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- A nobodyLv 71 month ago
When the market takes a large drop, many experienced investors/traders take it is an opportunity to pick-up some cheap assets.
When a market is taking a beating it is always the professional on the other side of the trade, market makers/specialist must take trades, while experienced traders/investors seize the opportunity for bargins.Source(s): from The Street
- tiescoreLv 61 month ago
Me. I love a discount, I upped the riskiness on my 401K a bit, up the stock allocation a bit on another fund, contributed to another fund and dipped into cash a bit in my stock account. Nothing major.
- Anonymous1 month ago
Me. I love when stocks are on sale, and I am not alone!
Also, there is a constant influx of money from large institutional investors. Very, very few employees stop contributing to their 401k due to market volatility.
- martinLv 71 month ago
Buyers in that situation would have to be courageous people willing to take a chance, because when the market starts to sink, no one knows for sure how low it could go.
- MichaelLv 71 month ago
People who see big sell offs as a buying opportunity.