Apologies to all who already know this stuff...I don't mean to insult anyone's intelligence -- just trying to help this guy out...
>>>how do you buy at bid and sell at ask? I thought you were supposed to buy at ask and sell at bid. am I missing something here?<<<
No, actually you're basically right. However, let's run over some basics real quick on just what "price" is (just bear with me for a sec here). I think we can all agree that it is the consensus agreement in the market on what a stock is worth at that moment in time, right? And we all know that the floor traders will price a stock at two prices, the bid and ask, in order to profit off of the spread, for the "right" of trading the shares. A buyer wants to pay the cheapest price he can get: the "bid". A seller wants to get the highest premium: the ask. The spread is the range that the orders are being matched at. If ASND is trading 40x40 1/8, then trades can be executed anywhere within that 1/8 spread. If a buy order hits the floor and has a limit of 40 1/16, and I am an impatient seller, I may accept that price rather than the ask of 40 1/8 just to get rid of my shares. The "last" price or "current" quote you see on a ticker is the price of the most recent settlement. However, when you watch a real-time ticker, you mostly see "last" trades tick up at the ask and tick down at the bid. That's because a large % of all orders executed are market orders. If you send a market order to the floor, the floor traders are going to match sells at the bid and buys at the ask, because they get to keep the difference in the spread -- they won't bother haggling to get you the best price. That's why market orders are a license to steal, for daytraders where every tick counts.
So the answer to your question is that yes, that's how it usually works, but you can get filled at the outsides of the ranges with the right kinds of orders and situation. That's what you do when you scalp. You try to mimic what the floor traders do.
Style Pts. |
