Thin Market

Categories: Trading, Metrics

Thin happens when few stocks are trading. Bonds too, actually. Thin is illiquid. Thin is when there just aren’t a lot of buyers at the given price levels. Thin is when trading volumes are described by the CNBC commentators as “anemic.” Thin is when the headlines ask, “Where have all the buyers gone? Long time passing…”

Fat is high volumes. Lots of cash being put to work buying securities. Fat is big demand to buy a big supply of, um...supply. Fat, or liquid markets, are generally driven by cash being put to work, which came from investors who simply saved their pennies to then deploy them in the markets, taking on more risk by being exposed to more volatility…and generally speaking, high liquidity, even in a world where the stock market is flat, is generally perceived as a bullish, or positive vote, in the future of stock market values.

Lots of opinions then go to work assessing the upside and the downside of the market, such that the gumball estimate effect is in place. And if you didn’t go to third grade in the last decade, the gumball estimate game revolves around the idea that, if many opinions estimate the number of gumballs in a big fish tank, those numbers get averaged, and way more often than not, the average guess is, in fact, very close to the actual number of gumballs crushing down on the guppies and goldfish. (Maybe we were supposed to remove the fish first.)

The same holds true in the stock market, where the aggregation of many opinions usually makes for better decisions, and in the case where a market suddenly grows thin, it means that a lot of educated, well-heeled investors have been spooked by the notion of taking on risk in their portfolios. So they de-risk, or simply keep the cash in their wallets, not wanting to put it to work until better signs come from, uh...on high.

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Finance: What is a thin market?13 Views

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Finance allah shmoop what is thin market peahen happens when

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few stocks are trading on bonds to actually thin is

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illiquid thin is when there just aren't a lot of

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buyers at the given price levels Thin is when trading

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volumes are described by the kindly wise cnbc commentators as

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being anemic Thin is when the headlines ask where have

00:29

all the stock buyers gone Long time passing bob dylan

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i'll go ask your parents finn is it Well not

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this guy Fat is high volumes lots of cash being

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put to work Buying securities fat is big demand to

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buy a big supply of supply Fat or liquid markets

00:48

are generally driven by cash being put to work which

00:52

either came from investors who simply saved their pennies to

00:55

then deploy them in the market's taking on more risk

00:58

by being exposed to more volatility and generally speaking hi

01:02

liquidity even in a world where the stock market is

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flat is generally perceived as bullish or positive voting in

01:09

the future of stock market values Yeah so what does

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all that mean Money being put to work is good

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It adds liquidity It means people are hopeful optimistic lots

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Of opinions Then goto work assessing the upside and downside

01:22

of the market such that the gumball estimate effect is

01:25

in place And if you didn't go to third grade

01:27

in the last decade the gumball estimate game revolves around

01:30

the idea that if many opinions estimate the number of

01:33

gumballs in this big fish tank those numbers get averaged

01:36

and way more often than not The average guesses in

01:39

fact very close to the actual number of gumballs crushing

01:43

down on the innocent guppies and other goldfish below The

01:47

same holds true in the stock market where the aggregation

01:49

of many opinions usually makes for better decisions or at

01:53

least more accurate estimates And in the case where a

01:55

market suddenly grows thin it means that a lot of

01:59

educated well heeled invest astors have been spooked by the

02:02

notion of taking on risk in their portfolios by taking

02:05

their safe cash and risking it in the market So

02:09

they d risk or simply then keep cash in their

02:12

wallets Not wanting to put it to work until better 00:02:15.065 --> [endTime] signs come from you know on high

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