Who Buys Stocks When Everyone is Selling?

PUBLISHED Mar 27, 2022, 8:34:26 AM        SHARE

imgStaff Writer

Who Buys Stocks When Everyone is Selling?

When there is a market sell-off, market makers, traders and long term value investors are on the other side of the trade buying these stocks at discounted prices. Trades can be completed almost instantaneously, and so prices can rapidly adjust to find buyers in the market. Since the stock market is efficient, sellers during a sell-off can find a buyer, but the trade-off for this convenience is selling their stock at a significant loss.

Why Traders Buy During a Sell-off

Traders buy during a sell-off because they are seeing a short term pattern that confirms a relief in selling pressure. This relief could be for a day, it could be just a few minutes, and for algorithmic traders, it could be seconds. Traders are not betting the sell-off has ended. They are indifferent to the overall market direction. The trader is buying only because they believe they can sell for a profit within a short time frame.
A bull penant pattern A bull penant pattern is an example when a technical trader will buy during a sell-off for a short term gain.

Why Market Makers Buy During a Sell-off

Market makers provide liquidity to the markets by being a buyer and a seller to participants in a stock or ETF. Market makers earn profits by making bids and offers on stocks that are advantageous to them.
For example, a market maker may buy Amazon stock at $2000, and immediately sell to other participants at $2010. Market makers profit from the bid-ask spread by providing liquidity.

During a sell-off, market makers continue to provide liquidity to the markets; however, they will demand much lower prices, which can cause sudden cliffs in the market price.

Why Long Term Investors Buy During a Sell-off

Long term investors buy during a sell-off because they believe the intrinsic value of the stock is higher than the price the stock has fallen to. Long term investors are typically the last market participants to buy during a sell-off, as they want to buy when they perceive a good deal.

Tips for Beginners During a Sell-off

During a sell-off, look to buy quality stocks to hold for the long term. Calculate the intrinsic value of a the stock first. Then, if the stock falls to its intrinsic value, buy just a small amount. Do not get over excited when the stock reaches the intrinsic value. Take a deep breath and wait at least two weeks to two months. Momentum will likely drive the stock price further below the intrinsic value due to the markets fear, irrational behavior, and the fleeing of momentum investors. See the full guide of beginner investor tips to learn more about investing.

Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
Is it Worth Buying Less Than One Share?

Buying less than one share is worth it. Fractional shares help retail investors jump into investing. But it's important to know what you lose when you buy fractional shares.

Should I Buy Red or Green Stocks?

You should never buy stocks just because they are green or red. Let's explain why stocks are colored this way and why they should not effect you investment decision.

OK, but . . .

Market Commentary

Best NFT Marketplaces to Buy or Sell Your NFTs

NFTs are still causing quite the stir in the Crypto Industry as Bored Ape Yacht has decided to launch its own Token and its DAO. The NFT marketplace can make or break your art.

News Dominates the Markets

market commentary

James Leveque’s Keys to Financial Freedom

Some tips and tricks that helped me in the financial game.

What is the Purpose of StockBossUp BossCoin?

What is this cryptocurrency called BossCoin? Why is it integrated in StockBossUp? BossCoin's purpose is to incentivize a flow of responsible and wealth-generating investment ideas on the StockBossUp network.

My pension fund is dropping

Practical tips to consider in times of economic downturn

Updates to StockBossUp

StockBossUp is adding new features as we leverage our new BossCoin boost and integrate live data into the app.

Why Managing Volatility Increases Wealth

Market volatility is a wealth killer. By managing the major up and down swings of your portfolio you can start to reliably grow your wealth.

Crypto Terminologies Every Noob and Pro Should Know

The Crypto space is full of jargon, but it’s not hard to understand once you get the hang of it. So if you've come across some new terms that you just can't seem to wrap your head around, here's a glossary for you. In this article, we've put together 20 + common crypto terminologies every noob and pro should know with definitions so that you don't have to struggle anymore. Let's begin!

Bored Ape Yacht Club: The Apex NFT Project

In one of our previous articles, we touched on NFTs and Real World applications, and we are sure you had a wonderful experience learning about NFTs. There’s a fresh kid on the block, “Bored Ape Yacht Club.”

Hyperbitcoinization: The Dawn of a Brave New World

Bitcoin got to its all-time high in 2021, and we can be sure that bitcoin is going to the moon. In this article, we will be focusing on institutions and countries that have accepted bitcoin as a legal tender and the journey of the world to Hyperbitcoinization.

StockBossUp - Diversified, Volatile, Wealth

Welcome to the biggest draft on the planet! Draft the best investment team you can. Get the stats on every investor in the StockBossUp network.

Concerns Continue

market commentary

An Indecisive Market

market commentary

Resources for Publishers
Resources for New Investors
Boosted with BossCoin