How markets actually work
The auction, the participants, and why price really moves.
A market is a continuous two-sided auction. At every moment there is a highest price someone will pay (the bid) and a lowest price someone will sell at (the ask). Price moves for exactly one reason: one side runs out of orders at the current price and the auction moves to find more.
Why price moves
It is not "more buyers than sellers" — every trade has both. Price rises when buyers are aggressive (lifting the ask) and sellers are patient; it falls when sellers hit the bid faster than buyers restock it. Urgency moves price, not headcount. News, earnings, and data matter only insofar as they change who is urgent.
Who is in the pool with you
- Market makers / dealers — quote both sides, earn the spread, hedge constantly. Their hedging is the force behind GEX.
- Institutions — funds moving size over days or weeks. They cannot fill in one order, which is why they need liquidity and why big levels get swept.
- Algorithms — most of the volume, most of the speed. They make execution efficient and fast moves faster.
- Retail — you. Smallest size, but also the most freedom: no mandate, no benchmark, and no obligation to trade at all. That is a real edge if you use it.
The honest starting point
You will not out-speed the algorithms or out-size the funds. Retail edge comes from selectivity — waiting for the handful of moments when the odds are visibly stacked, and doing nothing the rest of the time.