Market Depth questions

[Timmy]

Re: Market Depth question

This document should help.

 

[RamonR]

Re: Market Depth question

Revelant parts from the above posted link


How orders are queued for trading - There are strict regulations governing order priorities. Orders are queued and traded according to price-time priorities. Better-priced orders trade first. If there is more than one order at the same price, the order that was placed first has priority, except in the case of crossings.

 

[johnymm]

Question about market depth

I want to be sure that i'm getting the market depth, correctly:

If there is a stock/futures with the following market depth:

bid: $8
ask: $10.
bid orders volume: 1
ask orders volume: 1

Can I buy this 1 ask order and then sell to this 1 bid order?
Of course I will lose $2 from the spread...

Also: What's the chance that when I buy the 1 ask order - then my buying won't increase the spread even futher? It should be always that when there are many buyers - price goes up...but what guarantees that the "bid part" of the spread won't go down?

10x alot in advance.

 

[Trembling Hand]

Re: Question about market depth

Can I buy this 1 ask order and then sell to this 1 bid order?
Of course I will lose $2 from the spread...

Correct

What's the chance that when I buy the 1 ask order - then my buying won't increase the spread even further?

Correct the spread will increase out to the next ask.

It should be always that when there are many buyers - price goes up...

Not always. Especially if you are talking about "buyers" as the orders sitting in the Depth. They are not actually buyers they are bidders. There is a difference.

but what guarantees that the "bid part" of the spread won't go down?

Nothing.

 

[joea]

Hi.
My question is... If a share was trading at around 35.5 cents why would someone place a order for 20 million at 1 cent.
So the buys are about 21,600,000 with the sell side about 1,600,000.?

I do not know how often this type of thing happens, but I confirmed this approx.value with a broker and Comsec because the bottom level is not visible unless you have a platform.

joea

 

[investorpaul]

Hi.
My question is... If a share was trading at around 35.5 cents why would someone place a order for 20 million at 1 cent.
So the buys are about 21,600,000 with the sell side about 1,600,000.?

I do not know how often this type of thing happens, but I confirmed this approx.value with a broker and Comsec because the bottom level is not visible unless you have a platform.

joea

Hi Joea,

They do it to make it look like there is a lot of buyers.

If one was to casually look at the total buy depth they would see the 21,600,000.

However, if they had dug down and looked at the individual orders they would see the 20 m order as a "fake".

They hope that the uneducated will get caught up in the "hype" and think that there is a lot of buyers and they better jump on the stock while they can.

If enough people do this the price is pushed higher or at least supported at its current level.

The person with the fake buy order (20m) may then actually be selling into these new bids as they come onto the market.

 

[joea]

Hi Joea,

They do it to make it look like there is a lot of buyers.

If one was to casually look at the total buy depth they would see the 21,600,000.

However, if they had dug down and looked at the individual orders they would see the 20 m order as a "fake".

They hope that the uneducated will get caught up in the "hype" and think that there is a lot of buyers and they better jump on the stock while they can.

If enough people do this the price is pushed higher or at least supported at its current level.

The person with the fake buy order (20m) may then actually be selling into these new bids as they come onto the market.

Thanks Paul.
Will send you PM.
joea