Buyer for Every Seller?

[Buyer for Every Seller?]

There is no such thing as a sell order.

 

So you have 6 primitive types - buy market, sell market, buy limit, sell limit & buy stop, sell stop. [some exchanges support other types]

 

 

Thank you JZW. I did not know that until this very second, I have a greater grasp over the market.

[Buyer for Every Seller?]

You said this:

 

 

 

 

 

Which is not correct. A stop is NOT also a limit order. A "stop" triggers when the market trades at a certain price or higher (buy stop), or a certain price and lower (sell stop). It is NOT a limit order.

 

Forgive me, I wasn't paying attention because the order type didn't and still doesn't matter to me in regards to my question.

[Buyer for Every Seller?]

Duh, but a stop market is not a limit order. A stop limit is a different type of order than a "stop order." It's a "stop limit order."

 

I never said that it was -- when I gave my scenarios I wasn't giving specific order types -- I said 'sell order' or 'buy order' the type of order doesn't matter to me, just the direction.

[Buyer for Every Seller?]

I fully understand greg--but you said that a stop order is a type of limit order, and by general definition it is not, as it is not guaranteed to be executed at a specific price or better, as is a limit order.

 

There are stop market and stop limit orders.

[Buyer for Every Seller?]

At any rate, I'm done trying to help you. Instead of thanking people for trying to help you understand basic things, like the difference between a sell stop and a sell limit..

 

Josh, I apologize for coming off as an a-hole. I have a pretty firm grasp on the market, I was not asking for basics, I am asking about the actual mechanics of order execution aside from normal market conditions. As I have stated before, I am writing a market simulator in C#, I am not trying to get a basic grasp on the market.

[Buyer for Every Seller?]

There can't be any sell offers below the current price because they would fill immediately at the current price (not at their stated limit price which would be worse).

 

A stop is also a limit order.

[Buyer for Every Seller?]

Greg, good point--I was thinking in the context of typical market scenarios, where it's very uncommon except in illiquid situations (like globex oil trading for example) for offers and bids to shift such that the last price traded is above the best offer or below the best bid. I took a screen shot of this last night on my DOM because I thought I might use it in this thread, and I've attached it.

 

At any rate, I'm done trying to help you. Instead of thanking people for trying to help you understand basic things, like the difference between a sell stop and a sell limit, you use an off-the-wall scenario to show that I was wrong on one point--good catch though, I'm glad you pointed it out. Good luck in your trading, whenever you decide to begin.

 

The problem was that you initially were responding to my non-real life scenario with real life scenarios. My most recent postwhich restarted this thread included that I am programming a simulator and I gave specific scenarios. I was told that I did not understand the market by you.

[Buyer for Every Seller?]

I'm not sure you're clear on how orders work. A buy market can not cause price to move down.

 

A bid is a resting limit order to buy. A seller places a market sell order, and this is matched to a resting bid. Either you're very confused, or your terminology is incorrect.

 

 

Okay, so last traded price was 1000, resting offers are 10 at 900, 10 at 800. You do a buy market of 20, you get filled 10 at 800 first, then 10 at 900, so you're long 20 contracts at an average price of 850. Last price will now be 900.

 

 

Before a buy order could not cause price to go down -- now it can. I do not think you have the mechanics of the market as well understood as you think you do.

[Buyer for Every Seller?]

I feel like we are speaking different languages here. If I go out and to the /ES. Price is at 1100. We got asks at 1100, 1100.25, 1100.50 and 1100.75. And someone has a stop loss at 300 to sell. If I do a market buy, by your definition, I should get filled at 300 by your logic.

[Buyer for Every Seller?]

Okay, so last traded price was 1000, resting offers are 10 at 900, 10 at 800. You do a buy market of 20, you get filled 10 at 800 first, then 10 at 900, so you're long 20 contracts at an average price of 850. Last price will now be 900.

 

I don't think that's correct. Pretty sure 'best price' means the best price closest to the last traded price. If we were trading on the /ES and there were was a stop limit sell order at $1 and the current price was $1423 -- if i hit a market order, but your logic, I should get filled at $1.

[Buyer for Every Seller?]

I'm not sure you're clear on how orders work. A buy market can not cause price to move down.

 

 

 

A bid is a resting limit order to buy. A seller places a market sell order, and this is matched to a resting bid. Either you're very confused, or your terminology is incorrect.

 

Let's just say the last traded price was 1000 there are resting asks follows: 10 at 900, 10 at 800.

I do a market buy of 20, I would buy 10 at 900 and 10 at 800.

 

I am not talking about going out and trying this on /ES. This is completely hypothetical. I see no way for this scenario to not be correct as a market order means that you get filled at the best price. Which would be 10 contracts at 900 and 10 contracts at 800.

 

 

Edit: i accidently put bid, not ask

[Buyer for Every Seller?]

Seller can not drop the price below the bid. So, no I don't think it makes sense.

 

I think you are not understanding something... the seller creates the bid. The only bid in my scenario are lower than the last trade price.

[Buyer for Every Seller?]

I cannot read your whole post right now --- I just read a bit. My scenarios were completely hypothetical. The orders that were mentioned were the only orders in the 'market'. In that case, a market buy can drop the price if the only limit sells were lower. You will get the best price, which in this case is lower than the last trade price.

[Buyer for Every Seller?]

You guys are making this way more complicated then it needs to be.

 

What you need to understand is that there is a sell for every buy order but as point out a large buy/seller may offset to several smaller participants. So then what moves price?

 

Supply and demand.

 

But lets look at this, there are 2 prices for everyone market, bid & ask

 

Example:

 

1325.50

1325.25

 

Imagine 2 market participants, 1 wants to sell at 1325.50 and the other wants to buy at 1325.25. The orders wont cross and the price wont move. Real simple.

 

What happens if the sell at 1325.50 gets nervous (or he is really confident price will go down). He will cross the order on 1325.25 and the market, the last price printed will be 1325.25.

 

If he's the only seller willing to cross then the actual "market" will still be 1325.50/1325.25

 

When we talk about supply/demand then you need to understand there is a supply/demand curve. Buyers are willing to buy more at lower prices and sellers are willing to sell more at higher prices generally speaking. For example, there is no inventory for sell under the market.

 

The market is only slightly different in that there are many speculators who are forecasting price. Inventory is not unlimited. Most shares are held by long term investors who do not participate in either sells or buys.

 

Sometimes a market going up leads to more buying (when expectations of future price change) and sometimes it leads to more selling and reversals.

 

This can be understood by an example on EBAY. You see the price of a widget going up in price over time, maybe Christmas is coming up. You decide to step in and buy some inventory based on the trend. If you are right then you may resell the item you bought for a profit. If wrong then you may take a loss.

 

 

This has been established - can you comment on the scenarios that I gave.

[Buyer for Every Seller?]

if you see 10 going off at the bid, then you are seeing a match of 10 market to 10 limit buy or 10 market sell partially filling a larger limit buy order. If the order was smaller than 10, you would see the individual smaller orders summing to 10. If you see a trade going off at the bid, it is because someone does not feel like waiting for price to sell, they are selling lower now.

 

Mighty Mouse, just to check -- the order contained in the message that you were responding to would have been at the ask, not bid -- correct?

 

I have began to rethink about the mechanics of this as I am currently writing a market simulator in C# with automated participants -- just to gain a greater understanding of the mechanics (and also grow a huge appreciation for the genius involved in the softwares that manage our stock exchanges).

 

What is really interesting me is that during a breakout, someone has to be selling at every single tick that is traded at during the breakout. So really, a breakout fails (or any upmove) not just when you run out of buyers, but also can happen when you run out of people selling higher than the current price. For instance, if the price is 1000 and there are 10 contracts for sale 1001, 10 for sale at 1001.25 and 10 for sale at 500. I buy at the market 10, knock out the asks at 1001 -- price is at 1001. Buy 10 more at market, knock out the 10 at 1001.25 then buy 10 more at market -- I hit 10 asks at 500, price is now 500.

 

 

Edit: Another scenario to think about: if we are trading at 1000, Bill puts a sell order of 10 at 900, 10 at 800 and 10 at 700 --- then Bob buys market 10, price drops to 900, buys 10, price drops to 800, buys 10, market is now at 700 from market -- or 'aggressive' buys.

 

Another edit: When reading the tape many people say to filter by large orders to see the 'big boys'. As mighty mouse pointed out, this just means that an order of 500 market buy was matched to a limit sell of 500 -- there are big boys on both sides of the trade here, just one was a bit more patient for the trade. What you really want to see is a ton of 1's and 2's happen almost immediately -- this would indicate to me that a large market order was matched with a bunch of smaller orders from weaker hands.

[O/n for IB]

Does anyone here use the overnight session to establish the Ib? Obviously, 930 to 1030 is typically the IB, but I ask because XTrader uses the first two periods of overnight for the IB.

 

.......... .......... what is ib?

 

Ib = initial balance

[O/n for IB]

Does anyone here use the overnight session to establish the Ib? Obviously, 930 to 1030 is typically the IB, but I ask because XTrader uses the first two periods of overnight for the IB.

[Only Have 5K]

Velocity Futures requires $5000 and probably has the lowest retail commission of $4.5 round trip.

[Buyer for Every Seller?]

I am going to try to step through a hypothetical scenario:

 

The bid is 1000.25 and the ask is 1000. Let's say that there are a total of 10 contracts sitting in a limit sell order at 1000.25, another 10 contracts waiting to be sold with a limit order at 1005 and 10 more up at 1010. Several at market buy orders are sent and take out the 10 contracts sitting at 1000.25. Another handful of buy market orders are placed. This would move the 'price' up to 1005 instantly, correct? The market orders take out the 10 contracts at 1005 and they continue -- would the price again jump all the way up to 1010, given there are no sell orders between 1005 and 1010?

[Buyer for Every Seller?]

 

In my experience over the years of using trading forums it is only new traders that fuss over fine technical details like whether a trade in the time and sales window was a STOP or Market order or whether BID means selling or ASK means buying because they believe knowing this is going to make them rich. They want to be told that large orders @bid means selling so they can apply simple, rigid, mechanical rules to their trading. If it was that simple you wouldn’t have volumes of books dedicated to the art of tape reading.

 

The point of this thread was to gain understand on why the prices move, I wasn't fishing for a simple, mechanical trading methodology. I never really thought of the mechanics of the ebb and flow, but I started to think about the contradiction in two phrases: 'there are more buyers than sellers' and 'there is a buyer for every seller' . I now understand that the movements in price occur based on 'motivation' and the balance/imbalance of it.

 

Speaking of T&S, I have always found it helpful to pay attention to the speed of the transactions.

 

I sound like a broken record, but, again, I would like to thank everyone that contributed -- I really appreciate the information.

[Buyer for Every Seller?]

No, I think you are a little confused.

 

The market price is made up of two figures:

 

1) The current ASK price

2) The current BIDprice

 

The Last price is the price a trade was executed.

 

A person who buys @ market will be filled at the current ASK.

 

A person who sells @ market will be filled at the current BID

 

Orders sitting in the market can either be LIMIT or STOP orders.

 

A Volume of 1 in T&S means that 1 buyer AND 1 seller have exchanged 1 contract. Do you see? There isn't enough information to determine whether the contract was a LIMIT order or STOP order that was filled.

 

One of the facts that was shared here as that a RED order means that it occurred at the bid and a GREEN order means that the order occurred at the ask. Let's say the bid is currently at 1100.25 and the ask is 1100. If a GREEN T&S entry is seen for 1 unit at 1100.25 would that not mean that the seller would have to have used a limit order? A market order to sell would execute at the ask of 1100, correct? It is probable that the buyer used a market order, but the buyer may have put a limit order at the ask.

 

Basically my question is this: aren't all transactions a market order on one side and a limit order on the other?

[Buyer for Every Seller?]

Again, thanks everyone for the collective information -- awesome people here.

 

Let me just make sure of one thing: a red entry in the T&S at say 1000 means that a seller executed a market order at the bid price, which in turn executed a buyer's buy limit order at the bid?

[Buyer for Every Seller?]

I just remembered... no one answered why the times and sales does not show both sides to the trade. If there is a buyer for every seller, how can there be a buy of 1 in the T&S without a sell of 1?

 

 

Does the T&S only show market orders?

[Buyer for Every Seller?]

I just remembered... no one answered why the times and sales does not show both sides to the trade. If there is a buyer for every seller, how can there be a buy of 1 in the T&S without a sell of 1?

[Buyer for Every Seller?]

I think what you might be missing is this....

 

This is exactly what I was missing. Thank you so much for that.

 

I don't believe price would move if it wasn't for market orders.

 

This what I began suspecting while reading prior posts by other contributers.

 

There is quite a wealth of knowledge on these forums - you guys are great, thank you.