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Author Topic: Rseolving trades in a market  (Read 1135 times)
Nefario
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February 02, 2011, 08:43:19 AM
 #1

How are trades resolved in a market? first come first serve?

If you are a seller do you sell to the highest buyer?

How are buy/sells orders matched in a market?

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February 02, 2011, 08:50:29 AM
 #2

How are trades resolved in a market? first come first serve?

If you are a seller do you sell to the highest buyer?

How are buy/sells orders matched in a market?

Traders wishing to sell coins place 'Asks' at the price they are willing to sell them for.  Traders buying coins place 'Bids' at the price they are willing to buy coins for. 

If someone wants to sell their coins immediately, they will fulfill the highest bids.  Likewise, someone buying coins would trade with the lowest asks. The lowest ask will always be higher than the highest bid.

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Nefario
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February 02, 2011, 01:20:01 PM
 #3

Is that all? wow that is so simple.

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February 02, 2011, 01:25:44 PM
 #4

You get to decide how trades get executed, is it at buyers price? sellers price? median price?
Choice is yours.

Bitcoin central and mtgox work in the same way : the one who sells bitcoins is guaranteed to get the price he asked for when placing the order, the one who buys them is guaranteed that he'll buy from offers with a lower or equal price than the price he input when posting his buying order.

grondilu
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February 02, 2011, 01:32:19 PM
 #5

You get to decide how trades get executed, is it at buyers price? sellers price? median price?
Choice is yours.

Bitcoin central and mtgox work in the same way : the one who sells bitcoins is guaranteed to get the price he asked for when placing the order, the one who buys them is guaranteed that he'll buy from offers with a lower or equal price than the price he input when posting his buying order.

Say Alice places a bid for a quantity of 20 at a price of 1.1
Bob places a ask for a quantity of 10 at a price of 0.9
Carl places a ask for a quantity of 20 at a price of 0.95

How does this gets adjudicated ?
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February 02, 2011, 01:40:07 PM
 #6

Say Alice places a bid for a quantity of 20 at a price of 1.1
Bob places a ask for a quantity of 10 at a price of 0.9
Carl places a ask for a quantity of 20 at a price of 0.95

How does this gets adjudicated ?


Assuming Bob places his ask before Carl the following would happen on BC.

Alice buys 10 from Bob @0.9 for a total of 9. Alice has an outstanding bid of 10 @ 1.1, bob's order disappears from the system.
Alice buys the remaining 10 from Carl when he places his order @ 0.95 for a total of 9.5, alice's order disappears, Carl is left with an outstanding ask of 10 @ .95.

If Bob and Carl place their asks before Alice, then when Alice comes along the order is matched against the bids with the lowest price first.


grondilu
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February 02, 2011, 01:45:02 PM
 #7

Assuming Bob places his ask before Carl the following would happen on BC.

Alice buys 10 from Bob @0.9 for a total of 9. Alice has an outstanding bid of 10 @ 1.1, bob's order disappears from the system.
Alice buys the remaining 10 from Carl when he places his order @ 0.95 for a total of 9.5, alice's order disappears, Carl is left with an outstanding ask of 10 @ .95.

If Bob and Carl place their asks before Alice, then when Alice comes along the order is matched against the bids with the lowest price first.


Ok so it's simpler than I thought.  I also notice that there is a preference for low prices (a 1.1 bid and a 0.9 ask leads to a 0.9 transaction price, not 1), which does make sense I guess.
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February 02, 2011, 02:36:33 PM
 #8

I also notice that there is a preference for low prices (a 1.1 bid and a 0.9 ask leads to a 0.9 transaction price, not 1)
This has the advantage that you can easily buy a large quantity without needing to enter lots of different bids.

Suppose there are asks at 0.6, 0.7, 0.8 and 0.9, each offering to sell 10 BTC. You want to buy 50 BTC, and each BTC is worth 0.95 to you. You simply bid for 50 BTC at 0.95, and the system matches them up: you buy 10 at 0.6, 10 at 0.7, 10 at 0.8, 10 at 0.9, and your bid for the remaining ten at 0.95 stays on the order book.

If it didn't work that way, you'd end up paying 0.95 for all of the coins that you buy. No-one would want that, so they would need to enter separate bids at 0.6, 0.7, 0.8, 0.9 and 0.95.
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