Inside the spread

[Cableguy]

Hi everyone

I asked this question someone else but got little response, so thought here would be more appropriate. I'm trading CFDs using a direct access broker, right, say a given stock is trading at 100 - 100.25, a spread of .25.

I normally ask for the best possible price at 100, yet, the sellers are only willing to part with there shares at 100.25 - so why does my order get filled? Surely I'm asking for it lower then what's on offer?

Perhaps trying to understand the mechanics of the market will get me know where 🙄

Cheers

 

[Racer]

You are trying to sell at 100 and not 100.25 yes?

Well if you put it at 100p you will get filled cos you took from the 100p side..

say if there were
1000 at 100p and 500 at 100.25p
You put and order to sell 499 shares at 100p
the book would then read
501 shares at 100p and 500 at 100.25p

 

[Cableguy]

You are trying to sell at 100 and not 100.25 yes?

Well if you put it at 100p you will get filled cos you took from the 100p side..

say if there were
1000 at 100p and 500 at 100.25p
You put and order to sell 499 shares at 100p
the book would then read
501 shares at 100p and 500 at 100.25p

Sorry, I'm actually buying at 100p, so I just join the existing buyers waiting for our orders to get filled, but why do they? Sellers are asking 100.25? Would it be correct to assume that someone somewhere wanted to sell me stock @ 100p?

Cheers

 

[Racer]

Oh, okay..
But you will get someone who does what I have already described and so your order will get filled

It will show as an AT trade

 

[rich64]

Oh, okay..
But you will get someone who does what I have already described and so your order will get filled

It will show as an AT trade

Flubber;

The way to look at it is that the left hand side (bid) consists of those buying (from sellers) at 100, the right hand side (ask) are those selling (to buyers) at 100.25.

There are two ways you can trade, firstly, if you're on the outside of the market you simply have to buy at the market price of 100.25 from the sellers on the right side ask but with direct access, you are "inside the market" and can be your own market maker and join the bid on the left hand side and offer to buy stock at 100 (or indeed any price you want)

Remember, your chances of being filled depend on a number of factors and in a fast moving stock the chances are you may well be ignored as others step in front of you with higher prices if the stock is rising....I trade Nasdaq stocks and it's mostly pointless trying to get filled that way so just tend to buy on the ask at market prices.

I hope this is what you meant!!

 

[Cableguy]

Flubber;

The way to look at it is that the left hand side (bid) consists of those buying (from sellers) at 100, the right hand side (ask) are those selling (to buyers) at 100.25.

There are two ways you can trade, firstly, if you're on the outside of the market you simply have to buy at the market price of 100.25 from the sellers on the right side ask but with direct access, you are "inside the market" and can be your own market maker and join the bid on the left hand side and offer to buy stock at 100 (or indeed any price you want)

Remember, your chances of being filled depend on a number of factors and in a fast moving stock the chances are you may well be ignored as others step in front of you with higher prices if the stock is rising....I trade Nasdaq stocks and it's mostly pointless trying to get filled that way so just tend to buy on the ask at market prices.

I hope this is what you meant!!

Rich, Racer

That makes perfect sense thanks, I only trade UK stocks and my orders to get filled most of the time I seem to have defaulted into some kind of scalping strategy which wasn't my intention but works none the less.

The only other question I have is: my software doesn't allow me to place a stop because I placed a limit order as my entry onto the orderbook. This means that I have to watch my trades incase the market moves against me, is it like this with all direct access providers?

Cheers guys