Comments on: Why Did the Market Go Up?

by: Babak

Thu, 19 Jul 2007 02:58:59 +0000

Ugly,
I see what you mean but that’s just semantics. You could have 1000 different people buying each one share while the counterparty is one person selling 1000 shares. It wouldn’t really matter. And I don’t think that’s what people are thinking when they mistakenly say “more buyers than sellers” is why the market went up.

Markus, good point. I like that term. It expresses what goes on in the market more accurately. On a sidenote, Lowry’s most used indicators are called “buying power” and “selling pressure”.

by: Markus

Wed, 18 Jul 2007 07:42:41 +0000

Better say: There is more buying power than selling power or vice versa.
It is not the number of buyers or sellers who move the price but the volume which is eager to sell or buy. Therefore large players move the markets and are responsible for trends.
As you maybe all know there is this nice book by Larry Harris about market mircostructure which provides some good insight regarding this topic.

by: Ugly

Wed, 18 Jul 2007 02:33:09 +0000

Even if you define a buyer as “someone who has bought” you can have many more buyers than sellers. For example, let’s say I own 20,000 shares of GOOG and I decide to sell them all. Twenty people can each buy 1000 and there would be twenty buyers and only one seller (me).
But if GOOG went down because I sold all my shares at the market, it would actually be more correct to say that GOOG’s price dropped because there were more buyers than sellers.

by: Babak

Tue, 17 Jul 2007 15:31:17 +0000

yo, I don’t think they are buyers, they are more aptly described as bidders.

Martin, true. Since at any point in time those “willing to buy” can change their mind, evaporate or morph into “willing to sell” or actual sellers, I prefer to define buyers as those that actually engage in a transaction and not merely hint at their desire to go long.

by: Martin Gordon

Tue, 17 Jul 2007 12:58:56 +0000

It depends on how you define “buyer”. If you define it as “someone willing to buy” (vs. your “someone who has bought”), then there certainly can be more buyers than sellers. There’s competition amongst buyers to purchase the relatively scarce stock and they bid the price up until the price exceeds what some are willing to pay and those buyers get priced out.

It seems like basic supply and demand to me, but maybe I’m oversimplifying things?

by: yo

Tue, 17 Jul 2007 11:23:59 +0000

If you ever watch a level 11, you would understand that there are indeed many more buyers when the market is going up. They don’t all succeed in buying, but they are there and in spades.