Buy side vs Sell side

We often hear people mentioning "buy side or sell side" when talking about investing or trading. Do you know what it means? I guess most probably have no clue, let alone how Wall Street tries to take advantage by frontrunning us to make money from us. Here is a good brief explanation about this concept, which may interest you!

The Sell Side

 The "sell" side is made up of brokerages and banks. And it creates profits from Wall Street's many fees… whether you see them or not.

For example, popular brokerage app Robinhood offers "commission-free" trading… with a hidden fee. That's because the company sells your order flow to the highest bidder – who uses it against you.

High-frequency traders pay big money to see your buy orders come in so they can legally jump in front of them. They will buy the stock ahead of you and sell it back to you at a higher price.

And brokerage firms like Robinhood want you to make lots of trades so they can collect more money. That's why they propel the myth that profits come easy with fast trades. Remember E-Trade? So easy a baby could do it?

The reality is, it's not really in Wall Street's interest to help regular folks make smart, long-term investments. The more we buy and sell, the more they can profit.

Hands are in the pot from the very inception of a trade all the way through – with broker's fees, exchange fees, floor fees, clearing fees, and other transaction fees.

And the sell side's goal is to maximize all those fees.

The Buy Side

The "buy" side, on the other hand, must make money for its clients. This includes hedge fund money managers, institutional firms, and market makers.

I've personally seen these kinds of "Big Money" players quietly gobble up millions of dollars of stock. Then they go on TV, announce their huge stake, and watch the share price rise as eager buyers pile in.

Or remember Bill Ackman? During the pandemic, he was on TV sobbing about the end of our economy… only to be quietly buying the same hotel stocks he claimed were on the brink of destruction at a discount while investors panic sold.

By manipulating people into buying or selling, Wall Street can profit from us… rather than the other way around.

These are just small glimpses into the shady underbelly of the financial world, but they show how Wall Street's tactics can influence us…