Stupid Question number 3057

[alankew]

Sorry to ask such a stupid question but i only bought shares in the UK via a cheap phone dealing service with no advice.Since moving to Oz(another bloody Pom)i have traded using CFDs for leverage purposes and to create some working capital.My only share dealing experience over here was to sell some Mantra i bought via the IPO.CFDs only allow me to buy into the bigger companies and exclude the like of AUZ etc.My question is this,I have heard lots of mentions of market depth etc and when i look on comsec i can see the buys and sells screen.If i want to buy company XYZ nd it is currently 25c to sell 26c to buy is this the price i will pay(the market depth has various prices around about this level-is this what people will sell at for example someone might have a sell order at 28c so until the price hits that level they wont sell)Hope its not too stupid a question

 

[Space Cadet]

alankew

The market depth is just a listing of the buyers and sellers orders in a price/time hierachy currently in the market.

For a transaction to take place a buyer will have to place a buy order at at least the lowest sell price in the market at the time or a seller will have to place a sell order at at least the highest buy price in the market at that time.

The buy side is sometimes referred to the 'bid' side because those are the prices currently being bid by buyers for the stock and the sell side is referred to the 'offer' side because those are the prices sellers are offering for their stock.

So only when a buyer and seller agree on a price can a transaction take place. And so like in any supply/demand situation when there are more keen buyers than sellers in the market the buyers will have to bid higher prices to attract sellers and so the share price goes up. Vice-versa for when there are more sellers than buyers.

If interested, there is a truck load of info on investing/trading on the ASX on the Australian Stock Exchange site - maybe have a look at http://www.asx.com.au/investor/shares/index.htm

 

[macca]

Hi Alan,

Yes, you are on the right track, on Commsec the column on the right is the sell offers, you can buy them at that price, that is, they won't sell for less than 28c

Just watch a few trades around market open, you will soon work it put.

 

[alankew]

Macca and Space Cadet thanks for your replies!Now if you care to go to my next stupid question its about stop losses.And Macca i know about market opening,found out the hard way during the dotcon(not a typo)boom.Place an order to buy some shares at market price when the bid was something like $2 and offer was $3 ouch!