What are 'Buyers/Sellers On Balance'

Buyers/sellers on balance describes an order imbalance in a market at a specific point of time. The phrase also describes traders whose activity over a period of time trends predominately toward buying or selling, rather than a balance between the two.

BREAKING DOWN 'Buyers/Sellers On Balance'

Buyers/sellers on balance always suggests a situation in which more orders of one type outnumber orders of the opposite type. If a current market or issue has sellers on balance, more traders have entered sell orders than buy orders, causing an order imbalance. Conversely, if a market or issue has buyers on balance, more traders have entered buy orders than sell orders. Under normal conditions, these imbalances work themselves out quickly. In some situations where trading cannot take place, however, buyers on balance or sellers on balance conditions can persist until the resumption of trading provides enough market liquidity to bring trades back into balance.

Investors may be considered buyers or sellers on balance over a period of time if they purchase more shares than they sell or vice versa. A buyer on balance may see a number of potentially profitable opportunities in the market or may simply be saving diligently for retirement. A seller on balance may fear a market downturn or may have reached a logical point at which to take profits out of existing investment positions.

Trade Order Imbalances

Market orders require only that a broker fulfill them at the best available current price. These orders make up the vast majority of orders filled on the market and they occur at a security’s current bid price for sell orders and at the current ask price for buy orders. Trade imbalances tend to be transitory situations because markets can typically adjust to a changing demand environment. On an exchange, market makers or specialists can tap into reserve shares to even out imbalances during the trading day. Unless imbalances become so severe that the exchange suspends trading, a typical situation fitting the description of buyers or sellers on balance most likely would occur before the market opens or at the expiration of an option contract, when circumstances impede liquidity.

The speed and volume of market orders in a relatively liquid exchange makes large imbalances unlikely to remain in place for any significant duration. For example, as news of an impending buyers on balance situation spreads, some stockholders may use the rising prices triggered by rising demand as an opportunity to sell shares they would otherwise have held, adding liquidity to the market.

RELATED TERMS
  1. Imbalance of Orders

    Imbalance of orders is when too many orders of a particular type ...
  2. Closing Offset (CO) Order

    A closing offset order is a day limit order that allows the purchase ...
  3. Indicative Match Price

    Indicative Match Price is the price at which the maximum volume ...
  4. Imbalance Only Orders (IO)

    Imbalance only orders (IO) are limit orders that will execute ...
  5. Open Order

    An open order is an order to buy or sell a security that remains ...
  6. Continuous Trading

    Continuous trading is a method for transacting security orders. ...
Related Articles
  1. Trading

    Why limit orders may cost more than market orders

    Learn the difference between a market order and a limit order, and why a trader placing a limit order sometimes pays higher fees than a trader placing a market order.
  2. Investing

    The Opening Cross: How Nasdaq Stock Prices Are Set

    Learn how the opening cross auction process determines prices of Nasdaq-listed securities at market open to ensure liquidity by matching buyers or sellers.
  3. Investing

    Understanding Market Orders And Limit Orders

    A market order executes a transaction as quickly as possible at the present price. Immediacy is the main concern. A limit order is executed at or below a purchase or sale price. Price is the ...
  4. Trading

    Understanding order execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  5. 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.
  6. Trading

    Stop-Loss or Stop-Limit Order: Which Order to Use?

    While both can provide protection for traders, stop-loss orders guarantee execution, while stop-limit orders guarantee price.
  7. Investing

    How To Calculate The Bid-Ask Spread

    It's very important for every investor to learn how to calculate the bid-ask spread and factor this figure when making investment decisions.
RELATED FAQS
  1. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ... Read Answer >>
  2. What is the difference between a buy limit and a sell stop order?

    Understand the differences between the two order types, a buy limit order and a sell stop order, and the purposes each one ... Read Answer >>
  3. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
  4. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ... Read Answer >>
  5. How long does it take a broker to confirm a trade after it is placed?

    Learn about placing trades with a broker and the amount of time required to received confirmation of different types of orders. Read Answer >>
Trading Center