Explain Wall trading stocks to me, please

One basic question I’ve never understood about trading stocks, bonds, etc.: Why is there always a buyer, and right away?
If I want to sell anything else, I have to hope I can find a buyer. If I’m trying to sell a 1975 Mustang, I have to find someone who wants to buy a 1975 Mustang and then we dicker about the price. If I can’t find someone who wants it, then I can’t sell it, at least not immediately.
But you never hear someone say “I wanted to sell my XYZ stock today but I couldn’t find a buyer, so I’m stuck with it.”
Now I understand that the price will continue going down when there is less interest in a stock, and the lower price makes it more appealing to some. But wouldn’t there be some stock that people just don’t want at any price? Like if it is obvious the company is going down the tubes fast?
Or do I have the premise wrong? Does it happen that people try to sell stock and there is no buyer, at any price?

(Btw, I tried to post this same question yesterday just as the system went down. It appears it never got posted, but my apologies if this is a duplicate.)

Fungibility, volume and liquidity.

Your car isn’t fungible, for one thing. If I wish to buy some shares of Johnson and Johnson, I don’t care which ones I get - all JNJ shares are identical. If you are selling a 1999 Toyota Camry, in spite of the fact that that’s a very common car, yours is not identical to somebody elses 1999 Camry, and I have to look at it and dicker with you to see if I want it rather than the one some guy on the next block is selling.

Add to that the fact that there is a huge pool of buyers and sellers for JNJ shares (average volume nearly 9 million shares/day, 3 billion shares outstanding), and it becomes feasible for them to be bought and sold quickly, like you are observing. The trading exchange with specialists / market makers just facilitates getting the buyers and sellers together in real time. As I write this, in the first 40 minutes of the market, 700,000 shares of JNJ have traded, for instance.

And there isn’t always an immediate buyer (or seller). If, instead of buying JNJ, I wished to sell shares of some little pink sheet company in bankruptcy proceedings, I might have to wait quite a while to unload my shares.

Perhaps the following will help answer some if not all of your questions.

This four step guide will give you the foundation you always wanted. Learning
the basics in handling stocks.

This guide will help anyone, interested in getting into the stocks game. Once
you follow through the guide, you will understand it’s no rocket science. Only
thing is nobody ever try to explain it you from A to Z. Start now, just have a


Step 1 - Basics

Step 2 - Initial Public Offerings

Step 3 - Stock Market Players

Step 4 - The Life of a Trade

First, it is not true that there is always a buyer, right away. There is almost always a buyer at the right price, however. If you offer your Mustang for blue book retail, you might not find a buyer, but if you keep lowering the price you will definitely get a buyer. It might not be someone who wants to drive it but someone for whom it becomes worthwhile to move the car to another market to sell at a higher price, or to cannibalize for parts.

Right now, for example, Microsoft’s last trade was at $23.49. If you wanted to sell at $50, you would not find a buyer right away. If I wanted to buy at $10 I would not find a seller right away. You can place limit orders where you want to buy or sell stock, and specify the price you want to get/pay, as in these examples, and the order can sit for a while until someone takes the bait or the order expires.

If you are eager to dump the stock (let’s say you need the cash), you can offer to sell for $22 and it will be snapped up because a buyer can flip it for more, or perhaps treat it as an investment and wait for value to rise over time.

Most US stocks that you’ve heard about are very liquid. This means that you rarely have to wait to trade at or near the current price. However, there are times when a piece of information becomes availble that causes an “order imbalance”, i.e. too many buyers or sellers on one side of a potential trade price. Normally, trading is halted until all information has saturated the market.

The exchanges have ways of determining just how liquid a stock is. I won’t get into the specifics of market depth, continuity and spread. But these are metrics that are used for measurement. But again, most Dow stocks have so many potential buyers and sellers, each looking for the slightest discount or premium to the “true” value of a stock, that there will never be an imbalance situation for them.

For smaller illiquid stocks and those in emerging markets, these situations are quite common.

Basically, there are traders (called “specialists” on the New York Stock Exchange, and “market makers” in NASDAQ) that hold reserves of specific stocks to keep things liquid.

Thus, if you buy GE, your broker contacts (not always directly, but through people with seats on the exchange and a system of runners on the Exchange) the GE specialist on the NYSE. He either matches you with a seller, or sells you the stock from his own trading account. Same if you want to sell: if there’s a buyer, the specialist matches you with him; if not, he buys from you and sells it to someone later.

For NASDAQ, the market maker is usually an entire brokerage, and there are often several (the NYSE specialist is one person, and is specialist is multiple stocks). The same thing applies: if no buyer is available when you want to sell, the brokerage buys it for its own account and keeps it.

Specialists and market makers get a small fee on each transaction. By keeping a reserve, they can fill orders without major delays (though they always prefer not to have to go to that – it’s better to match a buyer with a seller).

Now, there are some thinly trades stock where you do have problems buying and selling. This is usually an issue with “penny stocks” – stocks selling at less than $5 a share. There is very little trading in such stocks, and no one bothers to make a market in them (specialists wouldn’t come into play; a stock that low priced would not be listed on the NYSE). That’s part of the issue with “pump and dump” schemes about cheap stocks: it’s hard to find a buyer, and you can get stuck.

There’s not always a buyer. It just seems that way when you’re trading the major stocks that average people invest in - so many other people are trading them at the same time, it’s nearly always possible for the stock exchange to find a buyer for what you’re selling (assuming you’re offering your shares at a good price, that is). For small companies that few people are interested in, it’s quite possible to want to sell your shares for a fair price and not find anyone interested.

And it doesn’t happen immediately, either. It usually happens very fast, but it’s possible for there to be a delay between you placing your order with your broker, and it actually being executed.

To speed things up for you, I think in some circumstances your brokerage will buy your shares from you immediately, knowing (or hoping, anyway) that they’ll be able to find a buyer for them soon enough.

You don’t have to specify a price, either. You can tell the broker “Buy 100 shares at market” or “Sell 100 at market”.

Saves fussing over a price decision, and speeds up the transaction.

RealityChuck hinted at another factor. Stocks that are bought and sold on the biggest exchanges tend to be from companies that issue a fair number of shares. Lots of buyers, lots of sellers.

Instead of comparing stocks to cars, think about it as buying a can of pop. If I want a can of Coke, there are a whole lot of places in town I can buy one. It’s just a matter of do I want to pay what they are charging. On the other hand, if I want a can of “Uncle Bub’s Snake Oil and Party Mix” (*** NOW WITH MORE SNAKE ***), it’s probably going to take a while for me to find someplace that is carrying it.