2.2.3 - What is Price?
Regardless of whether we‟re talking stocks, futures, foreign exchange, or any other product at
all, price is the amount a buyer pays to acquire a product from a seller.
Any one transaction involves a product, and two parties – the buyer and the seller. The seller
holds the product. The buyer wants to purchase it.
Price is the amount that they agree upon for the transfer of the product from the seller to the
buyer.
The key word in this sentence is…
… agree… The buyer wants to buy at this price. . The seller wants to sell at this same price.
They come together. There‟s a transaction.
So, what is price?
Yes, it is the dollar amount, or points value, that they agree to transact.
But that‟s not how I want you to view it.
Instead, view price as two parties making a buy and sell decision.
From a trading perspective…
Price is two traders making a buy and sell decision.
It‟s a subtle difference, but it‟s important.
Now, markets don‟t transact all at one price… they move. Thankfully, otherwise there wouldn‟t
be profit opportunity.
As we mentioned before, most people are happy to just accept that markets are price movement.
I‟m going to take us deeper. Now that we view price as not just the dollar or point value of each
transaction, but of traders making buy and sell decisions, we‟re going to look at how those
decisions make price move.
This will lead us to our deeper, and superior, understanding of the nature of the markets.