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More Sellers than Buyers

  • #1
  • First Post: Feb 24, 2006 1:12pm Feb 24, 2006 1:12pm
I hear this often. That there were more sellers than buyers - or I hear that there were more buyers than sellers. I also hear that this is an impossible statement because for every seller there must also be a buyer.

Which is true? How does this work?

Thanks,
cm
  • #2
  • Feb 24, 2006 1:43pm Feb 24, 2006 1:43pm
Quoting chartmonkey
I hear this often. That there were more sellers than buyers - or I hear that there were more buyers than sellers. I also hear that this is an impossible statement because for every seller there must also be a buyer.

Which is true? How does this work?

Thanks,
cm
Your Broker is on the opposite side of your trade, my trade & all the rest of their clients trades.[let's just say they have 98 more clients plus you and I]
If we all decided to sell,
Sellers = 100
Buyers = 1
Volume = Sum of all Lots sold by 100 Sellers.
Open Interest = Sum of all Lots sold by 100 Sellers.


Let's look at Commodity Futures [Globex may help explain it more.]
You want to Sell 10 Lots.
Your broker matches you up with someone who disagrees with you.
Perhaps that is actually 2 people who both take 5 lots each.
Sellers = 1
Buyers = 2
Volume = 10
Open Interest = 10

It moves your way & you decide to take some profit by Buying 5 Back.
The other 2 guys want to hold onto theirs and wont sell them to you.
Along comes the third guy and he's willing to take a Short position so, He sells them to you.
Sellers = 2
Buyers = 2
Volume = 15
Open Interest = 10

And so on and so on.

Notice that the Open Interest didn't change. That's because there are still only 10 contracts out there with Traders on either side of them. Guy #3 is now on the opposite side of either guy #1 or guy #2.
Open Interest only counts the Open Contracts. Not the ebb and flow of ownership on those contracts which is what Volume does.

Hope it helps.
  • #3
  • Feb 27, 2006 1:39am Feb 27, 2006 1:39am
Are you sure your broker is on the opposite side of your trade? If, this is so, then it is in your interest for you to lose (as far as your broker is concerned). I always thought that they made money only on the spread.

Taking an opposite position to me sounds somewhat unethical? Or am I way off here?
  • #4
  • Feb 27, 2006 12:09pm Feb 27, 2006 12:09pm
Quoting roguetrooper
Are you sure your broker is on the opposite side of your trade? If, this is so, then it is in your interest for you to lose (as far as your broker is concerned). I always thought that they made money only on the spread.

Taking an opposite position to me sounds somewhat unethical? Or am I way off here?
This is how all market makers operate, they are implanted there to take the other side of your trade....Think of how the Nasdaq operates, through a bunch of market makers for every traded stock on the exchange, they have to make a profit from the spread because they are not granted commissions by the exchange...This is 1 way why being listed on the Nasdaq is much easier than being listed on the NYSE....

It's not a matter of ethical or not, it's a matter of rules..These are the rules, play them well....


Thanks,

Nader
  • #5
  • Feb 27, 2006 12:20pm Feb 27, 2006 12:20pm
Quoting chartmonkey
I hear this often. That there were more sellers than buyers - or I hear that there were more buyers than sellers.
this is somewhat of a inside joke with traders. when someone says "hey, why did that stock go up" some jokester will always shout "because there are more buyers than sellers!". its simply a play on the supply and demand forces that move every market. when you think about it, more buyers than sellers is always the reason anything goes up in price, not just the financial markets.

and yes there does have to be one buyer for every seller in commodity markets, but the phrase has more to do with more buyers than sellers AT A CERTAIN PRICE.
Relax and be happy.
  • #6
  • Feb 28, 2006 12:22pm Feb 28, 2006 12:22pm
Quoting narafa
This is how all market makers operate, they are implanted there to take the other side of your trade....Think of how the Nasdaq operates, through a bunch of market makers for every traded stock on the exchange, they have to make a profit from the spread because they are not granted commissions by the exchange...This is 1 way why being listed on the Nasdaq is much easier than being listed on the NYSE....

It's not a matter of ethical or not, it's a matter of rules..These are the rules, play them well....


Thanks,

Nader
Nader

I appreciate the reply - I am still a novice and finding my feet here.

Wouldn't that mean, if an individual market maker (broker) for example consistently loses (i.e. you are long term profitable) that you are a loss to them? Why wouldn't they then just terminate your account? After all... you would be losing them money... no broker would like that! I guess terminating the account is unethical

I asked about brokers, but from your response I assume that Market Makers include the brokers themselves.
  • #7
  • Feb 28, 2006 1:57pm Feb 28, 2006 1:57pm
Quoting roguetrooper
Nader

I appreciate the reply - I am still a novice and finding my feet here.

Wouldn't that mean, if an individual market maker (broker) for example consistently loses (i.e. you are long term profitable) that you are a loss to them? Why wouldn't they then just terminate your account? After all... you would be losing them money... no broker would like that! I guess terminating the account is unethical

I asked about brokers, but from your response I assume that Market Makers include the brokers themselves.
Hi Nader,
{I'm sure there is more to this than what I am about to say. I'v never tried it}
Before you can become a Forex Broker, You have to prove financial collateral to be a Market Maker. ie All Fx Br_kers are MM's with the ability to cover 'x' number of contracts {trades}.

The freedom this gives them is the ability to decide at what price {currently} they are willing to buy/sell any particular pair. If they are a yard away from other MM's, they are going to be targets of all those that are presently discussing the possibility of Arbitrage Trading {buy from MM 'A' and sell to MM 'B' and keep the difference} This is therefore a self policing policy that keeps them all in the same ballpark.

That being said, Statistics show that 95% of Spec traders are broke and out of the game in 3 months. {like the unemployment numbers, I'm not sure if this is the same guy who just wont give up and keeps opening new accounts}
MM's have no need for any bad publicity that may say "I was winning, so they shut me down." unless of course you have a very large account and are trading based on something other than pure price movement in their house.{like arbitrage}
  • #8
  • Last Post: Feb 28, 2006 2:41pm Feb 28, 2006 2:41pm
Hi there
It's Ed here, Nader kindly answered my first post!

As for arbitrage, thats a valid point, however a trader cannot arbitrage as they can only work within their broker?

Would be great to buy from Broker A, and sell to Broker B!

That does however raise the possibility of pseudo-arbitrage scalping???

Get the price off a faster feed, and then buy from your slower original feed broker, wait for the pip difference to show and then sell... I guess though you guys have thought of that trick a long time ago.
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