A intermediary won’t lose money when a stock goes down in a bear market because the broker is usually nothing multitudinous than an agent acting on the sellers’ behalf in finding somebody else who wants to buy the shares. A broker is not required to buy from you if you inadequacy to sell shares and there is no one willing to buy.
It is rare that “everyone” is selling, as transactions only occur when there are purchasers and sellers. However, it can seem like “everyone” is selling when stocks are in a period of decline.
Can Everyone Be Selling?
Other distributors and investors are on the opposite side of a transaction, not usually the broker. To say “everyone is selling” is usually an erroneous statement, because in ordinance for transactions to occur there needs to be buyers and sellers transacting to create trades, even though those interchanges may occur at lower and lower prices. If everyone were to sell, there is no market in that stock (or other assets) anymore until sellers and clients find a price they are willing to transact at.
When a stock is falling it does not mean there are no buyers. The stockpile market works on the economic concepts of supply and demand. If there is more demand, buyers will bid more than the stylish price and, as a result, the price of the stock will rise. If there is more supply, sellers are forced to ask less than the stylish price, causing the price of the stock to fall.
For every transaction, there must be a buyer and a seller. If the last guerdon keeps dropping, transactions are going through, which means someone sold and someone else bought at that rate. The person buying was not likely the broker, though. It could be anyone, like another trader or investor who thinks the premium offers an opportunity to make a profit, whether in the short-term or long-term.
Key Takeaways
- For a transaction to occur, there must be a purchaser on one side and a seller on the other; even when prices are falling, there are buyers of the falling securities.
- A broker does not bring into the world to buy the stock you are trying to sell; a broker is there to act as an agent on behalf of the seller, finding someone to make the purchase.
- While agents are there to facilitate trade, market makers take the opposite side of a trade and buy or sell; yet, market makers don’t as a last resort offer the best prices.
Can a Stock Have No Buyers?
That said, it is possible for a stock to have no buyers. Typically, this finds in thinly-traded stocks on the pink sheets or over-the-counter bulletin board (OTCBB), not stocks on a major exchange like the New York Ordinary Exchange (NYSE).
When there are no buyers, you can’t sell your shares, and you’ll be stuck with them until there is some getting interest from other investors. A buyer could pop in a few seconds, or it could take minutes or even days or weeks in the took place of very thinly-traded stocks. Usually, someone is willing to buy somewhere, it just may not be at the price the seller wants. This occurs regardless of the broker.
The broker only places your order in the market place so it can transact with other non-functionals. The broker itself does not typically try to solicit a trade in a stock, which means your decision to buy and sell are up to you, and the stockjobber just facilitates those decisions.
If an institution acts as the
Brokers and Market Makers
As discussed above, many dealers are just trading facilitators. They don’t take a position opposite to your orders. Markets makers do take the irreconcilable side of a trade and may act as a buyer if you are a seller or vice versa.
Some firms that offer brokerage service are also sell makers. Market makers are there to help facilitate trade so there are buyers and sellers in stocks listed on the prime exchanges. This doesn’t mean they will always give a good price – they are just lay down some
The Broker Is a Conduit
On most trades, brokers act as conduits. They simply post your trade in the merchandise place so others can choose to transact with it. This means anyone may interact with your order, embracing other traders and investors, or market makers. There are times when a market marker will take the contrary side of your trade. They are providing liquidity, but will also try to turn a profit for providing that help, as any other trader or investor is hoping to do.
Most market makers and other traders will not buy something if they don’t create they can make a profit on it, which means prices will drop as far as they have to in order to entice purchasers back in.