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how to determine a price during trading?

  • #1
  • First Post: Edited 6:24pm Jan 6, 2011 6:05pm | Edited 6:24pm
I got several questions here:

1.
let's look at the current order book,it's in this way :
ask:
...
1.3456 50lots
1.3455 40lots
1.3454 50lots
bid:
1.3452 70lots
1.3451 50lots
1.3450 30lots
...

and the current price should be: bid: 1.3452 ask: 1.3454,
am I right?
----
2.
then, you enter the market, buy 50lots at 1.3454,
then the order book changes to:
ask:
...
1.3456 50lots
1.3455 40lots
bid:
1.3452 70lots
1.3451 50lots
1.3450 30lots
...
and the current price should be: bid: 1.3452 ask: 1.3455?
-------------------
3.
then, the sell sides notice the price is going up, it's hard for them to fulfill their orders, then they change their orders:
ask:
...
1.3456 50lots
1.3455 40lots
bid:
1.3453 50lots
1.3452 70lots
1.3451 50lots
1.3450 30lots
...

and the current price should be: bid: 1.3453 ask: 1.3455?

---------------------------
4.
then, if a guy enters the market to buy 40lots at 1.3465(he wants to push the price up.), the final price for him should be 1.3460 ? (the average of his price and the lowest price of ask order.) and the current price change to :bid: 1.3453 ask: 1.3456?

any comment? I am really confused.
  • #2
  • Jan 6, 2011 6:28pm Jan 6, 2011 6:28pm
For question 4:
there are only two types of orders: market order and pending order.
if you want to buy immiediately, you need to put a market order, the final price for you to buy is 1.3455, there is no way to buy at 1.3465 with a market order.

am I right?
  • #3
  • Jan 16, 2011 7:15am Jan 16, 2011 7:15am
Quoting bobowang
I got several questions here:

1.
let's look at the current order book,it's in this way :
ask:
...
1.3456 50lots
1.3455 40lots
1.3454 50lots
bid:
1.3452 70lots
1.3451 50lots
1.3450 30lots
...

and the current price should be: bid: 1.3452 ask: 1.3454,
am I right?
That's right....However, it's not actually the current price, it's just the current best bid and current best offer...

Quoting bobowang
----
2.
then, you enter the market, buy 50lots at 1.3454,
then the order book changes to:
ask:
...
1.3456 50lots
1.3455 40lots
bid:
1.3452 70lots
1.3451 50lots
1.3450 30lots
...
and the current price should be: bid: 1.3452 ask: 1.3455?
That's true as well...

Quoting bobowang
-------------------
3.
then, the sell sides notice the price is going up, it's hard for them to fulfill their orders, then they change their orders:
ask:
...
1.3456 50lots
1.3455 40lots
bid:
1.3453 50lots
1.3452 70lots
1.3451 50lots
1.3450 30lots
...

and the current price should be: bid: 1.3453 ask: 1.3455?
Fine...

Quoting bobowang
---------------------------
4.
then, if a guy enters the market to buy 40lots at 1.3465(he wants to push the price up.), the final price for him should be 1.3460 ? (the average of his price and the lowest price of ask order.) and the current price change to :bid: 1.3453 ask: 1.3456?

any comment? I am really confused.
No....If someone enters the market to buy 40 lots at 1.3465 and given the order book you mentioned, he will actually get filled at the best available price from the order book as long as the volume is there....

That is, he will get filled for the 40 lots at 1.3455 and that will be his average price after the trade is done...

The best bid and the best offer will then change to bid: 50 lots 1.3453 ask: 50 lots 1.3456...


Regards,

Nader
  • #4
  • Jan 16, 2011 12:31pm Jan 16, 2011 12:31pm
Quoting bobowang
I got several questions here:

1.
let's look at the current order book,it's in this way :
ask:
...
1.3456 50lots
1.3455 40lots
1.3454 50lots
bid:
1.3452 70lots
1.3451 50lots
1.3450 30lots
...

and the current price should be: bid: 1.3452 ask: 1.3454,
am I right?
----
2.
then, you enter the market, buy 50lots at 1.3454,
then the order book changes to:
ask:
...
1.3456 50lots
1.3455 40lots
bid:
1.3452 70lots
1.3451 50lots
1.3450 30lots
...
and the current price should be: bid: 1.3452 ask: 1.3455?
-------------------
3.
then, the sell sides notice...
My comment is that order-book trading is completely useless in forex. Forex is a decentralized market, thus you will never see all orders. For example, if deutsche bank enters the market with a couple of hundred million or billion dollars and you don't have them in your orderbook, you will never know why the market moved.
The big guys definitely won't publish their orders, if they don't have to.
  • #5
  • Last Post: Mar 15, 2011 2:35am Mar 15, 2011 2:35am
Quoting narafa
That's right....However, it's not actually the current price, it's just the current best bid and current best offer...



That's true as well...



Fine...



No....If someone enters the market to buy 40 lots at 1.3465 and given the order book you mentioned, he will actually get filled at the best available price from the order book as long as the volume is there....

That is, he will get filled for the 40 lots at 1.3455 and that will be his average price after the trade is done...

The best bid and the best offer will then change...
another question:
if there is a super big guy, he wants to buy 10 billions eurusd using market order, then the market will go straight up without any tiny retracement, right?
because it's a market order. it will eat up all the sell limit orders above the current price with no retracement,right?
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