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Title: I just realized I don't know exactly how 'limit orders' work. Post by: oda.krell on April 21, 2013, 11:20:47 PM Until now, I thought I understood how limit orders work, since I read about order execution, etc. But then I realized I don't know how limit orders work in the following scenario:
1) SELL @100 2) BUY @110 A 'Sell' limit order says "Don't sell below x", a 'Buy' limit order says "Don't buy above x", but what if a limit buy and sell not only match but have some room between them? At what price will the order be executed? And does this differ from exchange to exchange (i.e. does mtgox use perhaps a different way to determine the price in this case than, say, bitstamp)? Title: Re: I just realized I don't know exactly how 'limit orders' work. Post by: btcxchange on April 21, 2013, 11:30:43 PM Limit orders usually set at a specific price or better. Sell limit order @100 means "Sell at 100 or higher" Buy limit order @100 means "Buy at 100 or lower" Recommended quick start guide to trading terminology http://www.sec.gov/investor/alerts/trading101basics.pdf (http://www.sec.gov/investor/alerts/trading101basics.pdf) Hope that helps Title: Re: I just realized I don't know exactly how 'limit orders' work. Post by: DeathAndTaxes on April 21, 2013, 11:31:41 PM It would depend on what is on the books first.
If there is a sell x @ 100 order on the books (i.e. part of market depth) and you place a buy x @ 110 the trade will execute 100. If there is a buy x @ 110 order on the books (i.e. part of market depth) and you place a sell x @ 100 the trade will execute 110. Title: Re: I just realized I don't know exactly how 'limit orders' work. Post by: GerMG on April 21, 2013, 11:32:43 PM Limit orders usually set at a specific price or better. Sell limit order @100 means "Sell at 100 or higher" Buy limit order @100 means "Buy at 100 or lower" Recommended quick start guide to trading terminology http://www.sec.gov/investor/alerts/trading101basics.pdf (http://www.sec.gov/investor/alerts/trading101basics.pdf) Hope that helps exact Title: Re: I just realized I don't know exactly how 'limit orders' work. Post by: oda.krell on April 21, 2013, 11:41:08 PM It would depend on what is on the books first. If there is a sell x @ 100 order on the books (i.e. part of market depth) and you place a buy x @ 110 the trade will execute 100. If there is a buy x @ 110 order on the books (i.e. part of market depth) and you place a sell x @ 100 the trade will execute 110. Thanks DeathAndTaxes, that was the answer I was looking for. I understand it now, I think. Orders already on the market determine the (lowest, highest) current market prices, and an order placed later will be matched against those. |