What causes a security price movement?

[beerntrading]

my argument is that if you place a buy limit order at a higher price, it is the same as a market order.

Yup, exactly. It's a marketable limit order. But, if you place a very large order as a market order, you have no control, and a co-located server is likely to front-run you and lift its offers so you get filled at a price well above what market depth suggests.

It's not to say this happens all the time, or even frequently. But this can happen, and knowing it's possible means every time it could happen, it's prudent to protect so it doesn't.

Keep in mind the motive of your counter party...and that there is nothing in the market to suggest (or enforce) participants adhere to honorable or dignified behavior. (Again, not to suggest it's frequent, just that it can happen).

 

[novicetrader69]

so you mean your friend may place a sell limit a higher price than the best ask price and you will buy from your friend, thus pushing up the price right?

it cannot work like that, because your friend is not posting the best price at which you can buy. If you open a buy limit to buy at the high price your friend posted, it will be executed at as market order at the current ask price and your friend's order will remain unexecuted.

Ok this I do understand and can accept as an explanation of how things work but then I can't explain what happened to me once as a buyer and another time as a seller. I once posted a limit order with the wrong (higher) price and unfortunately I noticed the error too late, when the trade was already closed. I had bought at a significantly higher price. Another time I was selling, I posted my sell order at my wanted (higher) sell price, left it there for a few hours with the current price far from my ask and then suddenly I noticed that the sell order was partially fulfilled and I still remember thinking in that occasion "I'm not the only idiot posting limit orders with a wrong (higher) price".

How would you explain the above?

nt

 

[Peter10]

Ok this I do understand and can accept as an explanation of how things work but then I can't explain what happened to me once as a buyer and another time as a seller. I once posted a limit order with the wrong (higher) price and unfortunately I noticed the error too late, when the trade was already closed. I had bought at a significantly higher price. Another time I was selling, I posted my sell order at my wanted (higher) sell price, left it there for a few hours with the current price far from my ask and then suddenly I noticed that the sell order was partially fulfilled and I still remember thinking in that occasion "I'm not the only idiot posting limit orders with a wrong (higher) price".

How would you explain the above?

nt

I can't explain that, i have never experience that, maybe because I always make entry with a market order and exit with limit or stop for profit taking and cutting loss respectively.

 

[novicetrader69]

I can't explain that, i have never experience that, maybe because I always make entry with a market order and exit with limit or stop for profit taking and cutting loss respectively.

Funny, stuff I've been reading usually says never to go with market orders, always use limit orders.

nt

 

[Peter10]

Funny, stuff I've been reading usually says never to go with market orders, always use limit orders.

nt

though, limit orders gives you a better entry, but your entry on a winning trade isn't guaranteed.
And if you will ever loss the trade, your entry order will surely be executed when the price is moving towards your stop loss.

 

[Mnewton]

There are always 5 people (or computers) in a trade. One has a bid, one has an ask.
One can buy at the ask, one can sell at the bid , a mm can have a price between the bid/ask.
The price is in equilibrium when there are no trades.
When a block of stock is offered for sale at market then the bid will run down to fill the order.
If buyers see the action they will take away their lower bids and price will drop even further.
The exact opposite for purchases. This causes volatility. When a price is perceived as oversold then buyers will come in and buy up the stock and vice versa until the price reaches equilibrium again.
Which is the long way of saying the level of demand affects the price!.

 

[themickey]

Funny, stuff I've been reading usually says never to go with market orders, always use limit orders.
nt

In a fast market, I go market order.
For example, if there were a stock in hot demand and on open you can see from mkt depth stock may gap up but not too severely and you know you were competing with other numerous traders, set your order to market order (but don't pull trigger) wait for stock to open, if it has not gapped madly and there is liquidity, pull trigger. Attempting limit order will nearly always cause you to be left behind and chasing.
There is never a good way to enter manually on a fast stock, possibly there is using algos where you can set several trades and have OCO.

 

[100mcxtips]

The security prices are affected by the fluctuations on the force of demand and supply of that particular security. There are other factors like news, events etc but demand and supply are the main force that causes the fluctuations.

 

[novicetrader69]

The security prices are affected by the fluctuations on the force of demand and supply of that particular security. There are other factors like news, events etc but demand and supply are the main force that causes the fluctuations.

Yeah, I understand what influences the price, yet out of all posts here, no one has clearly explained what defines the last price (someone stated that it is the price of the last trade but is it?) or if it a calculated price.


nt