Asian Share Market, Asian Stock Market

Stock exchanges world over are fully automated and provide screen based trading without any manual intervention. Thus you can see the best prevailing price, the order depth, number of pending buy and sell orders and so on. All this is available online with the click of a computer. However before making a start, it is worthwhile to understand a few concepts about order execution. We will have a look at these concepts.

How Orders are executed- Price Time Priority

Orders are executed at stock exchanges based on price- time priority. Don’t worry too much about the concept. It is simple. Price time priority means that all the orders are prioritized in the order book based on the price at which they are given and when the price are same, the order given earlier has priority over other orders placed at the same price. You must remember that your buy order is called bid order and sell order is called ask order. The difference between best bid (which is the highest price) and best ask (which is the lowest price demanded) is called spread. Orders result in trade when best bid is more or equal to best ask or conversely when best ask is equal to or less than bet bid.

Types of order

There are basically two types of order. Buy order and sell order. When you want to buy a stock, you place a buy order with your broker and when you want to sell a stock, you place a sell order. You can place these orders via phone, through internet or simply while sitting in the office of your broker.

Limit orders/Market orders/Stop loss orders

Now you can place these orders at different prices. You can place a limit order. It means that you are willing to buy a stock at that price or lower and sell at that limit price or at a price better than that. You can also chose to place a market order, which means that you are willing to buy or sell at the best available bid or ask price without giving any price indicator in your order.

Disclosed and Undisclosed orders

You can disclose either full quantity or you can place undisclosed order. Thus say you have placed an order to buy say 100000 shares of a company, you may chose to disclose only 10000 shares to the market out of 100000 shares. As soon as your first lot of 10000 shares is executed, the next lot of 10000 shares will be disclosed then and this will go on till the entire 100000 shares are bought by you. These orders are generally given in case of big quantity to reduce the impact cost of your order.

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