Mass Psychology: WHAT IS PRICE?

Wall Street is named after a wall that kept farm animals from wandering
away from the settlement at the tip of Manhattan. The farming legacy lives
on in the language of traders. Four animals are mentioned especially often on Wall Street: bulls and bears, hogs and sheep. Traders say: "Bulls make
money, bears make money, but hogs get slaughtered."

A bull fights by striking up with his horns. A bull is a buyer-a person
who bets on a rally and profits from a rise in prices. A bear fights by striking
down with his paws. A bear is a seller - a person who bets on a decline and
profits from a fall in prices.Hogs are greedy. They get slaughtered when they trade to satisfy their greed. Some hogs buy or sell positions that are too large for them and get destroyed by a small adverse move. Other hogs overstay their positionsthey keep waiting for profits to get bigger even after the trend reverses. Sheep are passive and fearful followers of trends, tips, and gurus. They sometimes put on a bull's horns or a bearskin and try to swagger. You recognize them by their pitiful bleating when the market becomes volatile. Whenever the market is open, bulls are buying, bears are selling, hogs and sheep get trampled underfoot, and the undecided traders wait on the sidelines.

Quote machines all over the world show a steady stream of quotesthe
latest prices for any trading vehicle. Thousands of eyes are focused on
each price quote as people make trading decisions.

Arguing About Price

Traders who cannot give a clear definition of price do not know what they
are analyzing. Your success or failure as a trader depends on handling

It still has the value of whatever anybody will pay you. If no one wants to
pay you for it, it has no value.
It'll pay you for a yield.
What if you trade soybeans? You can eat them.
How about a stock that has no yield?
But doesn't it have assets?
The company that issued the stock has value, cash flow.
I give you one share of IBM; if no one wants to buy it, you can light a
cigarette with it.
There is no such thing that no one wants to buy IBM. There is always a
bid and an ask.
Take a look at United Airlines. One day the paper says it's $300 and the
next day it's $150.
There's no change in the airline, they're still making the same cash flow,
they've still got the same book value, and the same assets-what's the
difference?

The price of stock has very little to do with the company it represents. The
price of IBM stock has very little to do with IBM. A Price is the intersection of supply and demand curves. Each serious trader must know the meaning of price. You need to know what you analyze before you go out and start buying and selling stocks, futures, or options.