What is the selection market?

The selection market is a phenomenon on the stock market, which often does not occur. In principle, the market for selection is a short -term condition in which between the bid price and the price of the application for the investment is not distributed. In other words, security can be purchased or sold at the same price.

Several factors must be present in order to appear. First, at that time there must be an extremely large amount of liquidity on the market. If this high amount of securities is thrown into the open market, it can reduce demand and reduce prices to the securities. The final result is that while shares or commodity can be purchased at a good price, the ability to sell the same commodity simply does not exist.

The second factor that helps create a selection market is a temporary limitation of the number of intermediaries available on the market. This condition often occurs as the result of a high liquidity factor, as the extreme amount of liquidity directly affects the function and availability of intermediaries.When the high liquidity period lasts for a longer period of time, there are probably limited intermediaries and strengthen the presence of the selection market.

While the selection market can occur on almost any type of securities or trading market, the most common appearance of this phenomenon is on the Forex market or for trading in currency. It is not uncommon for pairs of currencies to have a temporary extension of zero or at least experience a situation where the difference is one of the basic or less. If the market or currency market is so close to zero, the situation is often seen as the predecessor of the onset of the selection market.