Many investors view the stock market as a colossal game of “The
Price is Right.” However, in the exchange markets, price originates
from two separate parties agreeing to disagree. If I am buyer of a
stock, it takes a second party willing to sell the same stock to commence
the exchange. So what is this second party’s opinion of the
stock I want to buy? Why would he desire to sell it? Obviously, he
believes it is going down. Otherwise, he would not agree sell it.
Meanwhile, I believe it’s going up, or I would not buy it. Thus, the
seller and I disagree on the future outlook of the security, and that
disagreement leads us to agree to exchange. This agreed-upon
amount is called price in the exchange markets. Thus, price is a single
point of agreement in a situation fraught with disagreement.