A:

A broker won't lose money when a stock goes down because he or she is usually nothing more than an agent acting on sellers' behalf in finding somebody else who wants to buy the shares. Even though sellers never meet the other party because everything is done over electronic trading systems, there always is another person (or company) at the other end of a transaction.

When everybody is selling in an effort to get their money out of the market, it is known as market capitulation. If a dealer in an institution acts as the principal (or the main party to a transaction) to a certain amount of stock, a rapidly declining stock price will certainly affect him or her. This is because, unlike an agent, the dealer is an owner of the stock.

It's important to know that when a stock is falling this does not mean that it has no buyers. The stock market works on the basic economic concepts of supply and demand. If there is more demand, buyers will bid more than the current price and, as a result, the price of the stock will rise. If there is more supply, sellers are forced to ask less than the current price, causing the price of the stock to fall. When stocks are traded, it means that buyers and sellers are coming together in equilibrium.

That said, it is possible for a stock to have no buyers. Typically, this happens only for thinly traded stocks on the pink sheets or over-the-counter bulletin board (OTCBB), not stocks on a major exchange like the New York Stock Exchange (NYSE). When there are no buyers, you can't sell your shares, and you'll be stuck with them until there is some interest from other investors.

RELATED FAQS
  1. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing ... Read Answer >>
  2. What are the key factors that cause the market to go up and down?

    Discover how factors like wars, inflation, government policy, technological change, corporate performance and interest rates ... Read Answer >>
  3. What does the variance between the bid and ask price of a stock mean?

    Find out how stocks are traded in the market, why the bid and ask prices are different and why the bid-ask spread is smallest ... Read Answer >>
  4. What is market capitulation?

    By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point ... Read Answer >>
Related Articles
  1. Investing

    The Ins And Outs of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  2. Managing Wealth

    8 Reasons Not to Sell Your Home Without An Agent

    Is saving the seller's side of the agent's commission worth the trouble of selling your home without one? Why it could cost you more in the end.
  3. Investing

    Ins And Outs Of Seller-Financed Real Estate Deals

    Seller financing works like this: Instead of a buyer receiving a loan from a bank, the person selling the house lends the buyer the money for the purchase.
  4. Insights

    A Breakdown on How the Stock Market Works

    Learn what it means to own stocks and shares, why shares exist, and how you buy and sell them.
  5. Investing

    Understanding Real Estate Commissions: Who Pays?

    When you set out to buy or sell a house, one factor worth considering is the real estate agent's fees.
  6. Investing

    How Do Real Estate Agents Get Paid?

    Here's how real estate commissions on home sales really work. And, yes, they're negotiable.
  7. Investing

    6 Questions For Your Realtor

    Before you start working with a real estate agent – especially if you're the one paying the agent's commission – make sure you've made the right choice.
  8. Investing

    How Real Estate Agents Get Paid

    Most real estate agents are paid a percentage of the property’s selling price, which is called a commission.
  9. Insights

    Tips For Face-to-Face Buying And Selling

    Be aware of these dangers when buying or selling goods in person.
RELATED TERMS
  1. Buyer's Market

    A situation in which supply exceeds demand, giving purchasers ...
  2. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
  3. Real Estate Agent

    A person with a state/provincial license to represent a buyer ...
  4. Offer

    1. When one party expresses interest to buy or sell an asset ...
  5. Purchase-Money Mortgage

    A mortgage issued to the borrower by the seller of the home as ...
  6. Equity Market

    The market in which shares are issued and traded, either through ...
Hot Definitions
  1. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  2. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  3. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  4. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  5. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  6. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
Trading Center