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How Stock Markets Work

Anna, I was interested to read your piece on how markets work. The ‘nuts and bolts’ always seem to be skirted over or assumed in other accounts I’ve read, but I’ve always been a bit unsure as to how the price mechanism works. For every seller there must be a buyer, and I couldn’t understand how, in a rapidly falling market, it would always be possible to find a buyer – meaning prices must fall much aster than it appears. If, for instance I have some HBOS shares at £5 and there’s sudden panic – why would someone buy them from me at £4, £3 or £2 . But it seems when markets are falling fast, you can always sell at any point on the way down. I probably haven’t explained that very well, because I’m still a bit bemused by the process! I’d be grateful for a guide to any books or articles that go into this kind of rudimentary ‘idiot’s guide’. Yours, Charlie