Pre-opening indicative prices

[hardcoremike]

G"day all. I'm a noob so excuse the question

I've noticed when watching market depths before the market opens, that the bid prices are insanely higher than the offer prices.
What is the reason behind this?

Cheers

 

[doctorj]

Have a read of this - http://www.asx.com.au/investor/education/basics/open_Close.htm - it might take a couple of goes to fully understand, but it will go a long way to helping understand how an opening/closing price is calculated and why you will often see very high bids.

 

[sam76]

I took a screen dump on the morning after the Dow dropped 286 points.
What I couldn't understand is if there are enough buyers to fill the sellers at 7.80 then why not sell at 7.80 instead of 7.50?

The opening price was 7.50.

What happens in a reverse situation - ie; buyers were as high as 7.80 pre-open but the opening price was 7.50. Would thos buyers at 7.80 actually pay 7.80 or as they are at the front of the cue would they only pay 7.50?



This has been on my mind for a while now.

Any help, as always, appreciated.

 

[explod]

I took a screen dump on the morning after the Dow dropped 286 points.
What I couldn't understand is if there are enough buyers to fill the sellers at 7.80 then why not sell at 7.80 instead of 7.50?

The opening price was 7.50.

What happens in a reverse situation - ie; buyers were as high as 7.80 pre-open but the opening price was 7.50. Would thos buyers at 7.80 actually pay 7.80 or as they are at the front of the cue would they only pay 7.50?



This has been on my mind for a while now.

Any help, as always, appreciated.

A tick to you, would pay 7.50. Start and the end of the day can be very dangerouse for the newby or unwary. On selling I have often seen sell orders premarket in what appears to be big support only to see the large buy order dissappear 30 seconds prior to trade. There are unscrupulous but cunning traders taking money off the lambs this way all the time.

I never trade till at least 10.30 and keep away from all stocks that have low inconsistent volume. When there has been a big fall overnight it is hard not to want to liquidate at market opening. Watch for it in future and you will note time again that there will be a bigdrop in the first 30 minutes (becomes oversold from the panic merchants) then it will rise and on this rise it will often go back to near the day before close by 11 to 11.30 which is the time to get out if need be. The strength of a stock between 2.15pm and towards 3 is usually about thrue value. The pros get togther over lunch and then make the big institutional buys.

Just my 2 cents.

 

[sam76]

A tick to you, would pay 7.50. Start and the end of the day can be very dangerouse for the newby or unwary. On selling I have often seen sell orders premarket in what appears to be big support only to see the large buy order dissappear 30 seconds prior to trade. There are unscrupulous but cunning traders taking money off the lambs this way all the time.

I never trade till at least 10.30 and keep away from all stocks that have low inconsistent volume. When there has been a big fall overnight it is hard not to want to liquidate at market opening. Watch for it in future and you will note time again that there will be a bigdrop in the first 30 minutes (becomes oversold from the panic merchants) then it will rise and on this rise it will often go back to near the day before close by 11 to 11.30 which is the time to get out if need be. The strength of a stock between 2.15pm and towards 3 is usually about thrue value. The pros get togther over lunch and then make the big institutional buys.

Just my 2 cents.

Thanks for you comment exp

That's right, beginners open and professionals close.

I never do any trading in the first half or last half hour (i'm not good enough), but this pre open "range" confuses me a bit.

I see a stock goes into positive p/o and watch the buyers build until it opens x percent higher. The thing that gets me all ticked off is that I'm one of the the first guys there and could have that "x" percentage under my belt when trading resumes then sell into the run making a quick profit (granted, this is an ideal situation)

So do the people that put in crazy bids 20-30 percent above the indicitive oopen price actually pay that much more or are they at the front of the cue when it opens and therefore only pay the actual opening price?

Cheers,

 

[nioka]

Preopen is like an auction. If the bids are priced above the sells The price is calculated at the highest price that will accomodate all the sellers offering to sell at a price equal to or below any buy offers. Detailed quotes prior to opening display this as an indicative price. As explod states this system can be exploited buy the placing of large buy orders at a high price to encourage sellers to offer at a low price in order to jump the queue. The buy orders are withdrawn on the death and the price falls on opening.
If you are trading and trying to jump the queue you have to watch for this to happen. Look at what would happen to your order if some of the "opposite" orders were to be cancelled. I often trade on opening but I always watch what is happening right to the end. Remember it can take valuable time to be able to amend an order. If you want to trade this way it is better to have two screens operating. I only use one.

 

[Shutty]

Here's a spreadsheet I made up to calculate the opening price using the ASX principles from HERE. Refer to the Notes sheet.

There maybe errors - no guarantee it's correct

Cut and paste the prices from your broker onto the Data sheet and see the estimated price shown.

Cheers Shutty

 

[doctorj]

Nice work Shutty. Thanks for sharing!

 

[Shutty]

Thanks Doc,

A big improvement would be to "scrap" the prices from a brokers webpage or somewhere instead of a cut and paste.

Not sure how to do that.

Cheers Shutty

 

[explod]

Here's a spreadsheet I made up to calculate the opening price using the ASX principles from HERE. Refer to the Notes sheet.

There maybe errors - no guarantee it's correct

Cut and paste the prices from your broker onto the Data sheet and see the estimated price shown.

Cheers Shutty

You need to be able to make a mental evaluation from a glance; at the critical time there is often not enough time. With practice you will do that, but unless you can see big advantages for your circumstances stay away from it.

 

[sam76]

So do the people that put in crazy bids 20-30 percent above the indicitive open price actually pay that much more or are they at the front of the cue when it opens and therefore only pay the actual opening price?

Thanks for all responses.

but what actually happens in the above example?

thanks,

 

[Wysiwyg]

G"day all. I'm a noob so excuse the question

I've noticed when watching market depths before the market opens, that the bid prices are insanely higher than the offer prices.
What is the reason behind this?

Cheers

I can`t see any other `reason` than ..... wanting to buy on open at the opening price.

I don`t see the question asking more for this simple answer.

 

[explod]

So do the people that put in crazy bids 20-30 percent above the indicitive open price actually pay that much more or are they at the front of the cue when it opens and therefore only pay the actual opening price?

Thanks for all responses.

but what actually happens in the above example?

thanks,

To specifically answer you, yes the crazy bid will be the first filled and gain the shares at the indicative open price. I have done it where I was aware that the price for a number of reasons would rise and so succeeded. I have lost doing it too.

 

[sam76]

To specifically answer you, yes the crazy bid will be the first filled and gain the shares at the indicative open price. I have done it where I was aware that the price for a number of reasons would rise and so succeeded. I have lost doing it too.

Thanks for the clarification.

 

[buggalug]

My provider has an estimated open, gives you an indication what the price will open at (Or close at the end of the day). Here's a screengrab of what it showed at about 4:05 today.

Is this not a normal feature?

 

[ozambersand]

I am bumping this thread as I noticed a question on the QBE thread that refers to it and have also included a link to this over there.
This must be one of the most commonly asked questions on this forum!
My added question is: Can traders put prices in both sides ie a high Bid for a few shares when actually they have a larger bid to dump shares and want to manipulate the price as high as they can?

 

[Trembling Hand]

I am bumping this thread as I noticed a question on the QBE thread that refers to it and have also included a link to this over there.
This must be one of the most commonly asked questions on this forum!
My added question is: Can traders put prices in both sides ie a high Bid for a few shares when actually they have a larger bid to dump shares and want to manipulate the price as high as they can?

The open is a price balanced out on volume. You can't "manipulate " with a few shares.

 

[jman2007]

The open is a price balanced out on volume. You can't "manipulate " with a few shares.

Trembling,

I don't think the question was referring to open prices, but more geared towards traders buying and selling between different accounts.

In a hypothetical example, if a trader was operating two separate accounts and had 100,000 shares he wanted to sell in company XYZ, it is feasible he could try to sell 5000 shares to himself at a premium in an attempt to manipulate and force the price up, and then dump the other 95,000 shares later in the day to unwary inevestors.

Very interesting thread, I've often asked myself some of the same questions. Thanks to explod for the clarifications.

jman

 

[Muschu]

With about 20 mins to go before the market opens the indicative prices seem consistently very low across a range of major stocks -- from financial to resources.

Any thoughts on this? The DOW was flat...

Have I missed some news over here in the Wild West?

Thanks

Rick

 

[Muschu]

With about 20 mins to go before the market opens the indicative prices seem consistently very low across a range of major stocks -- from financial to resources.

Any thoughts on this? The DOW was flat...

Have I missed some news over here in the Wild West?

Thanks

Rick

And then the world changed... I should have had my cuppa first...