Exchange. Supply and demand. Liquidity

So, what is a stock exchange?
Let's take a look at Wikipedia. Stock Exchange is an organizer of trade in commodities, currencies, securities, derivatives and other market instruments.
In simpler words, an exchange is the same market you usually go to, for example, to buy apples.
When you come to the market, what do you see? A lot of stalls offering the same product, apples, but each seller will have a different price. To illustrate this, look at the picture.
After going around several sellers, reasonably, you will choose the seller who offers the best price for apples, in our case it is the seller with a price of 5 rubles. Why would you overpay?
Here we have smoothly and smoothly come to the fact that the offer is the possibility of various producers and sellers at a particular time to provide this very product or service for a certain fee. In our case, it is the opportunity to sell you apples.
But what if you came to the market, went to all the sellers and you were not satisfied with the price, because recently the price was much lower. You start to approach and offer your price, hoping that one of the sellers will sell you apples at the price you want. This can be visualized in the picture where you are Buyer #1, but there may be many other buyers in the market and each wants to buy at a different price.
Here we come to such a concept as demand. Demand is when people intend to buy for a set price some good or service that satisfies a certain need. In our case, it is an opportunity to buy apples at a price that suits them.
Now our market with apples will look like this. On one side we have sellers offering apples at their own price, and on the other side we have buyers who do not want to overpay and offer a price for apples that they consider fair.
Let's add a more realistic view to our imaginary market and introduce such a concept as liquidity.
Liquidity is a property of a commodity or asset that characterizes the ability to sell or buy it quickly at the market price.
After all, in reality, not every seller has a limitless warehouse of apples and not every buyer needs to buy a ton of apples now.
Therefore, if a large buyer who needs to buy a whole truck comes to our market, even buying all the apples from the sellers, he will at most buy 10+5+20=35 kg.
The same is true in reverse, if a person comes to the market to sell a truckload of apples, the maximum he will be able to sell to our buyers is 5+3+15=23 kg.
Therefore, such a market will have low liquidity.
And lastly for today, our entire market can be visualized in the form of a table, divided into several columns for easy perception. In the middle we will have the price of apples, on the left the number of apples at the buyer, on the right the number of apples at the seller. Looking ahead, such a table on the stock exchange will be called Depth of Market, but more about it next time.
There you and I have figured out what an exchange is, it doesn't seem to be anything complicated.
Our friends
Made on