I suppose this might be a newbie sort of question, but essentially my question is what would happen if no one, not even the banks, traded the markets; FOREX, stocks, etc?
Thanks in advance,
KZ
Well nobody would have a market then. Not sure how else to respond or give input.
Well I guess my question is more of if no one traded, would the markets just continue to move up & down according to the economies of the globe? Or would the markets just stay at a consistent almost flatline level; possibly even in a range trend? I apologize if my questions are a bit vague. I really want to know what makes a market…a market. The ins & outs of the markets.
The market is made of transactions. For a transaction to happen, there needs to be at least one seller and one buyer.
The problem is : there are not always exactly the same number of sellers for the same number of buyers. That’s why price has to move.
If there are not enough sellers to match all the buyers orders, i.e. more people are buying than selling, price has to rise in order for enough sellers to be willing to enter the market and sell so that all the transactions can be cleared. The same happens when there are many people selling, but not many are buying. Those excess sellers need a buying counterpart, so price has to fall in order for the asset to look cheap enough for people to be willing to buy and everybody to be happy.
The constant search for a perfect equilibrium between buyers and sellers is also called supply and demand. Supply and demand is what makes prices move. Behind supply and demand are real people. People are the market. Without people there is no market.
So if no one buys, and no one sells, price goes NOWHERE. It’s not the economies of the globe that move the market, it’s supply and demand. Economies of the globe can be a motivation behind the buying and selling, but NOT necessarily. If an economy is doing bad, but for whatever reason people want to buy that economy, than price is rising. Simple as that.
Hope this helps!
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Its hard to treat forex and stock/commodities markets as the same market. They’re cousins but not the same.
In the stock market, if a market makers earn profits through the purchase and sale of shares, they obviously earn nothing if there are no purchases and sales. If there is no demand for the shares, they will lower the share price until people who don’t have the shares see them available at a discount and buy them, and/or some people who already own them will see them as a depreciating investment and sell them.
The stock market moves primarily because of supply and demand, and this can be created artificially through pricing.
The forex market moves primarily because of risk and reward: e.g. the big banks see the Japanese yen as being less risky than the US dollar so they sell dollars and buy yen: conversely, the big banks see a bigger reward from the dollar than the yen so they buy dollars and sell yen. Of course, some players won’t have enough yen to buy all the dollars their clients want so they also sell some Swiss francs or some euros. And so on and so on and so on.
In reality, none of these markets can stand still.
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if nibody sells and nobody buys the prices just stay where they are. stocks which were worth 25 per share in 2007 would be valued at 25 per share in 2019
this scenario isnt as fictive as some people might think. in communist countries of the former sovjet block exactly this was the case (you might wonder now WHAT SOVJETS HAD A STOCK EXCHANGE??? yes they did)
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