Questions about the trading process

[jazmil]

I understand that orders are placed in the system prior to the opening of trading. So,
1. If there are 100 buy orders for a particular stock, say XYZ at N20 and there is only enough supply for 80 of those orders at that price, are they filled according to which order was entered first? Or is there some other criteria?

2. Given that XYZ is currently at N20 and I place an order today to buy it at N25 ( a price it could only reach days later), would my order be the first to be filled once XYZ's price reaches N25.

3. When an order is entered, is it good until it is cancelled or does it expire after some arbitrary period.

Thanks for the help.

[Avocado]

You wrote:

I understand that orders are placed in the system prior to the opening of trading.

Perhaps; but I think it's also possible to place orders during trading hours; that's possibly a recent flexibility offered to 'ordinary' investors; but it's very possible. Some not-so-flexible stockbrokers don't offer this service.

3. When an order is entered, is it good until it is cancelled or does it expire after some arbitrary period.

An order is good until it is cancelled; if you have enough funds, the stockbroker may job the order for sevral days until the shares are bought or sold; this may happen if the instruction by the broker is flexible (note that stockbrokers make commissions form trades and so are interested in trading; the good stockbroker will strike a balance between this hunger fro trade and commissions with the intentions of the client). It is agood to leave a clear instruction, say: "Buy 1000 units of XYZ shares at a maximum price of N40.50 per share; this instruction is valid for the next three trading days, today inclusive". From that, you're sure that (excluding commissions), yo won't be spending more than N40500; it may be less.
.

[Avocado]

1. If there are 100 buy orders for a particular stock, say XYZ at N20 and there is only enough supply for 80 of those orders at that price, are they filled according to which order was entered first? Or is there some other criteria?

Perhaps someone else could weigh-in on this... I don't suppose that trades are this mechanical anymore. This kin dof 'order' may be the 'fairest', but it probably isn't the best from the demand/supply point of view. Orders are jobbed, and usually, the first orders should be filled first; but you may ask your stockbroker about this.

2. Given that XYZ is currently at N20 and I place an order today to buy it at N25 ( a price it could only reach days later), would my order be the first to be filled once XYZ's price reaches N25.

Strange. Why would you want to buy a share trading at N20 for a price of N25? Let's assume you've given the instruction anyway; then, realistically, your order should be one of the first to be filled: you're offering N5 extra per share and thus, your offer ought to be attractive for a those willing to sell. Your stockbroker could buy at a price lower than N25, but not more according to your instruction. Now, things may be happening onthe floor to prevent your oder from been executed: if there're heavy trading of the stocks for example. (I've been trying to buy a stock for a price slightly above the trading price for several days without success; the number of trades and the volumes and the price shows there's some strategoic positioning going on, so small volume investors stand only a small chance....)

Hope that helps some.
.

[jazmil]

Thanks for the input.

Originally Posted by Avocado

.
Strange. Why would you want to buy a share trading at N20 for a price of N25? Let's assume you've given the instruction anyway;
.

Lol...I only used those values for the sake of numerical simplicity. I just want to know if there is a level playing field when trying to purchase a scarce stock and if there is anything I can do to put myself at the front of the pack. I figure knowing the mechanics of trading process would help. For instance, do the larger orders take precedence, or the first orders at the current price, or is it open to manipulation by brokers.

[Avocado]

Basically, it's demand/supply dynamics; other things may be thrown in, liek when people are buying for strategic reasons, or a block movement of shares is happening, or some holder of huge shares begins to dump (happened to Guniness sometime ago; prices dropped to N60...). There're 'funny's tockbrokers, but it's safe to assume most are attempting to earn a honest living. Of course, there's lots stuff going on, but, like your doctor or solicitor, keep your stockbroker close; I don't suppose stockbrokers can directly manipulate share prices in the way it appears you're asking about ...

.

[paragon]

hi guys, this is how it works. before trading proper starts, stockbrokers key in their orders for the day. Most times some of these orders may not be available, so they will be on queue in the system. Whenever someone has what you are looking for, then you order can be excuted. It works on the principle of FIFO which means First In , First Out.

As regards the price, what you need to do is give your broker a limit order. A limit order is the minimum price at which your broker should purchase a stock. For example if you want to buy Dangote Sugar shares, you can give your broker a limit order of N45. What this means is that they will not purchase the shares at a price more than N45 . Of course you have to monitor the price movement of a stock before you place a limit order.

The other way it can be done if you cannot accurately place a limit order is to tell your broker to buy at the market price. that way, they will buy at the prevailing price at the floor.

This might atimes be risky though. Assuming you give you broker money to buy Dangote Sugar at the existing market price and there are many people on the queue before you, the share may be bought for you say after days when the price would have moved up from N45 to N55, after which it gets to N57 and starts to fall. You end up making a loss.

Therefore , the limit order is just ideal.

[c kenneths]

All of you guys are correct on the above topic, but do you guys see these stockbrokers as, first humans and then Nigerians, they are there to make money primarirly, without minding whose ox is gored.

The system is so non transparent that you will be shocked. This is how I think it works, based on a personal experience, you order a scarce stock and your broker is laughing at your back, struggling to buy his own first, and after the stock has appreciated a while and you are still interested, he will want to know if you re ready to buy at the new high price, and if yor are like the average Nigerian you will say yes, they the same broker goes on to offload the - yes the stock he bought cheap to you !

Its a dog eat dog world and there's nothing you and me can do about it , at least for now.

[Avocado]

Originally Posted by c kenneths

...It's a dog eat dog world and there's nothing you and me can do about it , at least for now.

Unless one becomes a stockbroker, eh.
.

[dotunk]

i agree with you all. stock brokers... most of them sha are after their pockets first. you know, wait till the price rises to get more commission.

the way i see limit order is to for a sell order. tell him to sell at this price range and nothing else. you also have to monitor the market and call him to remind him that the price is now in the range you specified. this way he knows he cant mess with you.

i got a new broker recently and by the time i finished telling him what i expected of him, he knew i was not one of those incestors who dont know what they want. i even think his mind skips a beat when he sees me though he seems happy to see me (cos of the business i bring him i guess).

[Avocado]

Originally Posted by paragon

As regards the price, what you need to do is give your broker a limit order. A limit order is the minimum price at which your broker should purchase a stok. For example if you want to buy Dangote Sugar shares, you can give your broker a limit order of N45. What this means is that they will not purchase the shares at a price more than N45 . Of course you have to monitor the price movement of a stock before you place a limiy order.

Is this how it works? This sounds counter-intuitive. I'd think an investor would wish to set an upper limit for a buy... In any case, is there some rational explanation for giving an instruction to buy with a minimum price to buy?

.