Imbalance of Orders
Categories: Trading
The goal of the stock market (or any market, for that matter) is to match buyers and sellers. You want to sell your 50 shares of AAPL. You push a button on your computer. Somewhere in the transom of cyberspace, other computers recognize your desire to sell, find someone else looking to buy 50 shares of AAPL, and match the orders. Eureka! The shares transfer to the other person and you get some cash.
Sometimes, though, there are too many people trying to do one kind of action, and not enough people on the other side. Too many shares trying to get sold, without an equal level of requests on the buy side. Or vice versa.
When that situation comes up, it's known as a "market imbalance." Like a teeter-totter. Except that, on one side, you've got a four-year-old kid with an underdeveloped petuitary gland...and on the other, you've got a sumo wrestler who just came from an extended lunch at Johnny Dancer's Wildly Indulgent Buffet Hut.
Usually, small imbalances are smoothed over by a market maker. These are middle men who dip into their own reserve of shares (or buy extra if the imbalance goes in the other direction) to keep the market liquid. However, if things get way out of whack, trading in the stock (or whatever asset is being traded) might get halted while the market waits for a resolution of the imbalance.
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Finance: What is a Liquid Market?17 Views
Finance allah shmoop What is liquid market Well it's one
that trades Ah lot High volume Lots of buyers Lots
of sellers Liquid lots of cash sloshing this way In
that way Go this way and that Did you ever
see a liquid market go this way and that That
little song Did you ever see a lassie Never mind
All right Weir Liquid markets Good Well because they implied
there's Lots of cash ready willing and able to be
put to work And that's usually a sign of a
healthy risk seeking active market versus risk averse one which
is you know hiding Ah liquid market means that investors
want to put their cash toe work that they have
actually saved cash along the way and or that they
have relatively easy access to credit And you can think
about it from the perspective of your kindly loving realtor
who wants a world where lots of people are buying
homes But in orderto have that happen you have to
have lots of people who are also selling homes at
the same time Otherwise prices just go higher and higher
with no supply to meet demand And at the end
of the day in real estate and it's in the
stock market while the most important thing yes that the
brokers get pays So that's a liquid market one that
trades a lot like it's Wet trading back and for
sloshing around not ice Where everything's you know all jammed 00:01:22.109 --> [endTime] up No needs heat or an animal or something