quote:
A couple of things, I'm very new to trading and i'm in on this at .04 and .13. I use scottrade and i have to buy on limit.
What are MMs?
How do you buy ask vs. bid?
Just to reiterate what he said...
First, Scottrade only requires a limit order on stocks under one dollar. I assume all others (e.g. TD Ameritrade) require this as well.
Ask= someone is selling and did a limit order
Bid= someone is buying and did a limit order
So lets say FTCH is at .15
You have people posting limit sells (
Ask) from .15 and up... such as this:
.25 150000 shares
.17 1000 shares
.16 1500 shares
.16 5000 shares
.155 2000 shares
.15 1000 shares
(notice once the shares through .17 get bought, the price will likely jump to .25 unless other people jump up to sell. Because .25 has a lot of shares, that is a point of resistance)
You also have people buying buy posting limit buys (
Bid) that will be under .15 because they are hoping for a pullback or dip to get them at a discount:
.149 1000 shares
.145 1500 shares
.14 1000 shares
.135 2000 shares
.13 450,000 shares
(note at .13 there is a large block that might act as as support... meaning if it dropped it might take a while to chew through all of those shares)
In the above case, there is an impasse. Nothing gets traded because there are no buyers or sellers agreeing on a price. What moves the market is when someone decides to pick the bid or ask. So let's say I want in this stock bad... I will put a limit order in for .15 (if it is only 1000 shares, it executes... if it is more, 1000 gets printed and the remainder hang until someone else posts a limit sell at .15). This is buying the ask.
If I want to buy the bid, I can put a limit order in to buy at .149 (to save a thousandth of a cent), but I would be behind the others that posted at this price. If I put a bid in for 150000 shares, they may get picked up, or the price could go up and I could miss out getting in. Hence, if you want to get in, bid the ask.
[This message has been edited by Tabasco (edited 5/13/2009 8:55p).]