If you come across a bear and decide to run, what matters is that you run faster than the slowest person you are with, not that you be able to outrun everyone you are with or outrun the bear. This same sort of logic applies to trading, too. You don’t need to be the smartest (or fastest) trader around, just smarter (of faster) than enough people with enough buying power to move stocks.
Disclosure: This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.
I am still struggling to fully understand the overall dynamics or “demographics” of trading. For example, if I buy how will I know there will be enough people to sell to? If I short, how do I know that I can cover?
You look at the volume and the bid and ask and avoid trading stocks that don’t have good volume.
Thank you very much for that explanation, I’m taking my time to learn the market before investing and I’m glad I found your link on Profit.ly from Tim. You guys ROCK!!