On 2011-02-09, at 11:09 AM, Shane Mage wrote:
>
> On Feb 9, 2011, at 10:21 AM, Doug Henwood wrote:
>
>>
>> On Feb 9, 2011, at 10:02 AM, Shane Mage wrote:
>>
>>> "All the money?" Doesn't every trade have two equal--and opposite--sides?
>>
>> Oh right. Markets can never go up or down because for every seller there's a buyer, and vice versa. Perfect balance!
>
> And when they go up, the bears lose. And when they go down, the bulls lose.
> What the bears lose, the bulls win. And what the bulls win, the bears lose.
> Perfect balance (except for the house cut, taken from both gangs of speculators).
> I assume, if you put your money where your mouth is, you're shorting food commodities.
> Hope you win.
It's true that someone always has to be on the other side of the trade, buying or selling the stock, bond, or futures or options contract.
But the number of buyers and sellers is less important than the price at which they are settling. It is speculation at both ends, with a winner and a loser, but it is still speculation - based on each party's assessment of the underlying fundamentals affecting the commodity and mostly, it would appear, by market sentiment, particularly the direction in which markets are moving in a given session. With with the advent of high speed computers and program trading, especially "flash" trading, keyed to market sentiment, futures markets can turn on a dime, resulting in big price swings which magnify movements based on supply, demand, and other factors in the real economy.