Ask, Last, Bid Parameters In Order Types (Market, Limit, Stop)

Trembling Hand said:

LOL, doesn't that break the interweb?


Monkey0 I will save you from crashing the internet and causing a black hole to appear at the centre of the earth in which we all get sucked into by offering a 30 min phone call to help clear all this up.

I think that will be the quickest way to answer your questions rather than 1000s of words back and forth. If you think that would be helpful I can private messaged you my number?

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Nice Jesture

You'll need a translator.

So many questions and nothing solved so far Not easy when you need very EXACT answer on microscopically detailed question but cannot find it anywhere

monkey0 said:

So many questions and nothing solved so far Not easy when you need very EXACT answer on microscopically detailed question but cannot find it anywhere

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Did you take up the offer to speak with Trembling Hand over the phone?

skc said:

Did you take up the offer to speak with Trembling Hand over the phone?

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Yes we spoke. Thanked him for his time for me, appreciate and respected his time. I even offered him payment so he wouldn't consume it for me for nothing. However honestly not a single question was answered. He spoke only what I already learned. Only user ''ngombi'' really offered a piece of needed info that I was really asking for. I am still searching for consultant who could answer my remaining questions. Did my best to research for them on my own but the questions seem to be too detailed to just find an answer from X resource. It could be possible I am asking too many questions at the same time.

monkey0 said:

Hi,

My question is related to any trading platform and any country's stock market.

3 types of orders exist and two situations so we have 6 combinations:

1. Limit order, buying
2. Limit order, selling
3. Stop order, buying
4. Stop order, selling
5. Market order, buying
6. Market order, selling

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Ok the night market is quiet so I will have a crack at this. Lets just get buying to enter under control.

5. Buy at market. You will pay whatever the ask is until your order is filled. If you say buy 1000 at market, and there is 500 @ 4.48 they will buy 500 @ 4.48, then if the market is running you might have to pay $4.60 for the next 500. They will fill at what ever ask price is there until your order is completed.

1. Limit order - This is really buy at market with a top limit. eg. Buy at market with a limit of $4.50 means you will be filled at any price up to $4.50. You may get a part fill at $4.48 and the rest at $4.50 depending on how many sellers there are. Or if as above the market runs off, you may get 500 at $4.48 and no more. You could be stuck with a partial fill. Think of it as buy at any price but no more than $4.50.

3. Buy on stop. eg buy 1000 on stop at $4.50. Say if you want to get in but only when some resistance is broken, say $4.50. What will happen is once the stock trades at $4.50, your order becomes a market order and you will be filled at what ever ask price is available. Might be $4.50, might be $4.60. So think of it as buy at market but only once the stock trades at $4.50 or more.

Then with some brokers you can combine them. You can say buy on stop at $4.50, limit $4.60. You will then be filled somewhere between $4.50 and $4.60, if the market depth is there. This protects you from gaps.

beachlife thank you for reply. Major part of your message, user ''ngombi'' already explained. However in platform like Speedtrader, there is no ''stop limit'' as what are you indicating in latest paragraph of your message. It is just ''stop'' and only one price to be defined. But regarding ''stop'' there are several facts that confuse me:

1 (stop only): I understand the price on market has to match my defined price but its confusing when you said ''stock trades at $4.50''. Stock cannot just trade at something but there must be some comparison between TWO prices if they match: the one I define and another one. You forgot to say which one is ''another one''? Obvious answer is ''the trading one!''? But which one? Probably Ask price if I buy (my defined price must match with Ask price) or Bid price (my defined price must match with Bid price) if I sell. Thats what ''ngombi'' said - yes i choose for which price to sell/buy but it has to be compared with something so it reaches/matches it - I don't have any particular question here. So if reaching is done, I spent/earn exactly what I define in the ''stop'' trigger/order because as far as I understand in same microsecond is then conversion to market order done *AND* that order processd. So again, if reaching is done (if exact price as defined IS on market after i add stop trigger/order), I always buy/sell for exact price as defined in stop trigger/order. If not true, please tell me whats wrong then.

2 (stop only): When price gets the same, the ''stop'' trigger/order is executed and market order processed: IF i buy then im buying according to Ask price. IF i sell then im selling according to Bid price. For beginner like me, this is very important. Its not just ''trading price'' - it is either Ask price or Bid price. Thats understandable BUT:

2.1 What if I am buying (Ask price vs. my defined price) and my defined price is NOT reached/matched but instead gets above my defined one? E.g. I define $4.50 but Ask price on market moves from $4.48 to $4.51?
2.2 What if I am buying (Ask price vs. my defined price) and my defined price is NOT reached/matched but instead gets below my defined one? E.g. I define $4.50 but Ask price on market moves from $4.51 to $4.49?
2.3 What if I am selling (Bid price vs. my defined price) and my defined price is NOT reached/matched but instead gets above my defined one? E.g. I define $4.50 but Ask price on market moves from $4.48 to $4.51?
2.4 What if I am selling (Bid price vs. my defined price) and my defined price is NOT reached/matched but instead gets below my defined one? E.g. I define $4.50 but Ask price on market moves from $4.51 to $4.49?

I am only referring to the prices (defined one, bid one, ask one) in stop trigger/order so BEFORE it gets converted into market order or at exact conversion time. So in 2.1, 2.2, 2.3, 2.4 im referring to the case whether or not conversion into market (and then market order processed) gets done in those four situations. Does it happen? Or not? In which situation yes, in which not? To clarify even more: In those four situations im only asking if conversion from stop to market will be done or not. I know what will be spent (Ask price - buying) or earned (Bid price - selling) in market order then.

3 (stop). I did my best to be as much as possible understandable and so I will be again: In your part of the comment you indicated an answer for 2.1 and 2.2, you forgot for 2.3 and 2.4: However according to what you said, I should be in ''stop'' trigger/order forced to potential infinity lose. Limit order (yes i know im talking about ''stop'' but had to mention ''limit'' anyway) is known that if im buying, the order is processed when defined price is the same as Ask price (so i spent exactly what i define) OR if Ask price gets below my defined one. For selling in Limit order is opposite: Bid price the same as defined one OR above. But in stop trigger/order I can see potential infinitive lose: As far as i know I only define ONE price (at least in speedtrader platform). So since conversion from stop to market order is done only at the time (if in any other times, answers on 2.1 2.2 2.3 2.4 will telll) when my defined price reaches Ask (if buying) or Bid (if selling), we CANNOT know what will be the market price (ask/bid) in that exact ''reaching'' time - we cannot annonce this in advance. So if buying, that market price can go to the sky high and i would be ''forced'' to buy for that ''sky high'' price. Or if differently saying: if selling, the market price can go in that exact conversion/reaching time to the bottom and I would be ''forced'' to sell for tiny price. There must be some protection for this. Isn't it? So we can protect ourself from extreme lose.

4 (all 3 cases - stop buying, market buying, limit buying): If enough stocks, for exact price I want to buy are NOT available, then I buy for exact wanted/defined price whichever quantity is available. Order for remaining quantity still remains active even after I buy lower quantity than I want to so for that remaining stocks, the order is still there. Price never changes (unless I do manually) regardless on any case (out of 3). Then we have two possibilities:

A) All remaining stocks become available (same price as defined).
OR
B) Only partial quantity of stocks become available (same price as defined).

If A: Those remaining stocks get automatically bought and then order gets finished/cleared.
OR
If B: Only partial quantity get automatically bought. Step B is repeated (for again remaining stocks) and order remains until entire quantity is bought (if GTC status of order).

Question: Is what I said correct or not? Yes or No? If No, what is wrong - most likely that Im wrong with thinking that the price won't automatically change?

before I tackle that, are you talking about cfd's or shares?

Ok, I’ll try to have a go at explaining the “stop order” that you seem confused by.

Say you want to buy when price moves above $4.50 (it is currently trading below this price), you’d place a buy stop order at $4.51, then if the last traded price (not the bid or ask, but the last price) is at $4.51 or above (it does not need to exactly match, only be at or above that price), then your order will automatically become an “at market” order and will trade at the best (lowest) price available at that time. So what price you'd get filled at (ie. the price you'd actually pay) you could only guess at - you would not know before the event. You could make a reasonably educated guess as what price you'd likely get filled at (ie. the price you would pay) based on what is in the market depth, but you wouldn't know for sure until your order has actually traded.

The primary benefit of a stop-limit order is that the trader has precise control over when the order should be filled. The downside, as with all limit orders, is that the trade is not guaranteed to be executed if the stock/commodity does not reach the stop price.

A stop order is an order that becomes executable once a set price has been reached and is then filled at the current market price. A limit order is one that is at a certain price or better. By combining the two orders, the investor has much greater precision in executing the trade. Because a stop order is filled at the market price after the stop price has been hit, it's possible that you could get a really bad fill in fast-moving markets (slippage).

For example, let's assume that BHP. is trading at $40 and an trader wants to buy the stock once it begins to show some serious upward momentum. The trader has put in a stop-limit order to buy with the stop price at $45 and the limit price at $46. If the price of BHP moves above $45 stop price, the order is activated and turns into a limit order. As long as the order can be filled under $46 (the limit price), then the trade will be filled. If BHP gaps above $46, the order will not be filled.

Buy Stop = is an order to buy above the current price. If you place a buy order below the current price its a limit order, simple as that.

AlterEgo said:

Ok, I’ll try to have a go at explaining the “stop order” that you seem confused by.

Say you want to buy when price moves above $4.50 (it is currently trading below this price), you’d place a buy stop order at $4.51, then if the last traded price (not the bid or ask, but the last price) is at $4.51 or above (it does not need to exactly match, only be at or above that price), then your order will automatically become an “at market” order and will trade at the best (lowest) price available at that time. So what price you'd get filled at (ie. the price you'd actually pay) you could only guess at - you would not know before the event. You could make a reasonably educated guess as what price you'd likely get filled at (ie. the price you would pay) based on what is in the market depth, but you wouldn't know for sure until your order has actually traded.

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That's how it works for shares, or futures, cfd's are different, which is why we need to know what he is trading.

worldwide stocks regardless on name of platform. I assume the answers are the same no matter which platform would be used.

hello?

Ok I think I understand your confusion.

Buying : buy at $4.50 on stop, the order will become active as a market order if the stock trades at $4.50 or more, based on last price, could have been bid or ask met, doesnt matter.

Selling : sell at $4.50 on stop, is $4.50 or less based on last.

monkey0 said:

2.1 What if I am buying (Ask price vs. my defined price) and my defined price is NOT reached/matched but instead gets above my defined one? E.g. I define $4.50 but Ask price on market moves from $4.48 to $4.51?
2.2 What if I am buying (Ask price vs. my defined price) and my defined price is NOT reached/matched but instead gets below my defined one? E.g. I define $4.50 but Ask price on market moves from $4.51 to $4.49?
2.3 What if I am selling (Bid price vs. my defined price) and my defined price is NOT reached/matched but instead gets above my defined one? E.g. I define $4.50 but Ask price on market moves from $4.48 to $4.51?
2.4 What if I am selling (Bid price vs. my defined price) and my defined price is NOT reached/matched but instead gets below my defined one? E.g. I define $4.50 but Ask price on market moves from $4.51 to $4.49?

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Forget about bid or ask. All that matters for stocks is last, which is the traded price. Once the last price triggers your order it will become a market order and will fill at the best available price, ask if buying, bid if selling.

For example. Last is $4.49. Spread moves to $4.49/$4.50. Nothing will happen until someone buys at $4.50. The spread could sit there for 2 seconds and move back to $4.48/$4.49. If no one bought at your price then nothing would have happened. (different for cfd's)

Or there could be some news and the price jumps to $5. That will trigger your order and you may be filled at $5.10. Extreme example but possible.

monkey0 said:

A) All remaining stocks become available (same price as defined).
OR
B) Only partial quantity of stocks become available (same price as defined).

If A: Those remaining stocks get automatically bought and then order gets finished/cleared.
OR
If B: Only partial quantity get automatically bought. Step B is repeated (for again remaining stocks) and order remains until entire quantity is bought (if GTC status of order).

Question: Is what I said correct or not? Yes or No? If No, what is wrong - most likely that Im wrong with thinking that the price won't automatically change?

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Yes correct. Order remains active until filled or cancelled, but without a limit, it will always be completed at some price.

Alright, what you said is completely against what user ''ngombi'' said but thank you for clarifying 2.1, 2.2., 2.3 and 2.4.

In Limit order, selling is done if defined price is the same as, according to the latest explanation received in this topic, LAST price or above (limit order!!!) and buying is done if defined price is the same as LAST price or below. In Limit order are earnings (selling) then based on BID price while spendings (buying) are based on ASK price. The difference to the Stop order is that said bolded words in this paragraph are replaced so:

In Stop order, selling is done if defined price is the same as LAST price or below and buying is done if defined price is the same as LAST price or above. Also in Stop order are earnings (selling) then based on BID price while spendings (buying) are based on ASK price. Is everything what i typed here, in second and third paragraph, correct?

In ''3.'' could be possible that I still wasn't understandable. Assuming the answer on question in second-previous sentence is positive then: At the time of buying when stop order gets processed, which means when it goes into market order, the difference between Last price and Ask price (=price of spending per one stock) might be so extreme that I lose infinitive amount of funds. Differently said: Ask price could be in rare situations so much higher than Last price that I would be automatically buying for very much unwanted price with which I would never agree on. Very extreme, perhaps even unrealistic, example (still assuming the answer on asked question is positive):

defined price in stop order (max amount i want to pay for one stock): $4.50
last price: $4.54 (so stop order is processed)
ask price (after last price is above defined one): $7.20
quantity of stocks to be bought: 1000

So i would be willing to invest $4500 maximum but here I would be actually forced to spend $7200 so $2700 (7200 minus 4500) would be literally wasted for nothing. As far as I know only ONE price can be defined in the order. Is there any protection and if so, which, that such disaster wouldn't occur? I won't complain for selling case (earning a way too less as I would want to) because Im sure same protection of same answer could be used for selling also.

Yes all correct.

Here is a real example from BHP. Say your order was buy on stop was $36.35, so at the end of this day nothing has happened.



The next morning it opens at $39.75, so you are filled at that price or maybe a bit higher, then it falls and keeps falling. You have spent more than you want and maybe lost more than you want.




This is where stop-limit orders can protect. If your order was buy on stop at 36.35, limit 36.80, your order would not have been filled because it opened above your limit. Not many online platforms offer this, but you can use a full service broker where it will be managed by a person, not a computer.

So since in all orders (market order, limit order, stop trigger/order) can be defined only one price, if I understand well, there is no such protection I would manually within platform make in Stop trigger/order to prevent situation of infinity lose (buying/selling for unwanted price) described on example in my previous post? Or is there something that could be done? What were you showing in graphs isn't protection at all. Its only assumption based on historical records. You were ending your latest reply saying I would have to discuss such protection with broker. So that means I cannot implement solution on my own? I apologize for consuming your time and complaining so much but if you aren't sure what exact situation am I talking about then please review my text of previous message starting with: In ''3.'' ...

No for protection use a limit order not a stop order. Buy at $4.50 limit means you will pay no more than $4.50.

Ok understood all. Although I have other questions, not related to this topic anymore, it is explained/solved. If you know any private econsultant who could teach/answer for payment, please let me know his/her contact details and I will message to ask where to send my payment for his/her service. For this topic you helped a lot - I understand now what I was asking. Thank you very much for your time.

burglar said:

My broker does not offer these things of which you speak.
As far as I know, every broker is different.
Therein lays some of your difficulty.

Use the KISS principle.
KISS is an acronym for "Keep it simple, stupid"

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Alternatively: "Use the Force!!"