Bid/Ask Market/Limit/Marketable Limit Question

[Debbie 1]

Hey guys,

Can you clarify my understanding of bid-ask? I've rewatched the segment a few times and tried google too. This is from Class 3, ~10-11 minutes in.. link here

(class link: https://www.bearbulltraders.com/lessons/orders-level-2-candlestick-price-action-trade-managment/)

Bid Ask:

Why is the market order on the ask side (right side of the montage), and limit order on buy side (located on the left side of the montage)? I would have thought intuitively that for any order, no matter what the strategy (market, limit, marketable limit), it would be on the same side of the bid/ask montage...

Think I'm missing something totally basic here. 

Thanks!

[Abiel 475]

For fast executions in day trading, you use marketable limit orders to buy to the ask (sellers) and sell to the bid (buyers)... 

[JimSlater 2]

Hi Debbie,

Yes, the orders can be confusing, until you think about it for a while.

Both of those hotkeys actually create market orders.  DAS allows for special market orders with a range (0.05 or whatever you specify). Hence the term "Marketable Limit Orders".

The side that you order ends up showing on the Montage depends on if it's a sell or buy. (buyers on the left and sellers on the right)

I like to  think of it in terms of I will always get the worst price.  In other words, when I sell, it will be at the lower price and when I buy it will fill at the higher price.  So the market maker (and broker) can pocket the spread.

Hope that helps!  🙂

Jim

 

[Debbie 1]

Hey Jim, Abiel:

 

Thank you - that's super helpful.

In the video, starting at exactly 10 min and 48 seconds in,  he says the below regarding regular Limit orders  (he's not referring to marketable limit orders in this sentence). Am I hearing/seeing this  all wrong? 

"If I press Limit (only) to buy, I need to go Sell on the Bid" 

And then he goes refers to the LEFT side of the montage (Bid side).

 

Shouldn't he be going to the right side - the ASK side, since he's buying??

 

(class link: https://www.bearbulltraders.com/lessons/orders-level-2-candlestick-price-action-trade-managment/)

 

Edit: In another section of the training, he says the below in quotes, which I think might be the same point.

"Desperate Buyers never SELL on the BID. They Hit the ASK."

Why would any Non-Desperate buyers sell on the bid then? Shouldn't all buyers, desperate or not, be hitting the Ask, since they're buying? Or, is he referring to  Selling Short?

 

Again, think I'm missing something super  basic here, and it's driving me crazy. lol. Help...

 

Edited January 17, 2020 by Debbie
edit

[Debbie 1]

Thanks Peter. Your iphone example is super helpful and helps me understand the structure further.   🙂

I'm still not getting what Andrew was saying in the video in two cases -  requoted below. Could you tell me what I'm missing? I wonder if it has to do with my (wrongful) assumption of the differentiation of who's guy A, guy B and guy C.

 

1. Andrew: "If I press Limit (only) to buy, I need to go Sell on the Bid"  And then he moves his mouse to refers to the LEFT side of the montage (Bid side).

 

Question: Shouldn't he be going to the right side - the ASK side (Guy A), since he (myself/retail trader/Guy C buying an iphone) is buying? 

 

2. Andrew: "Desperate Buyers never SELL on the BID. They Hit the ASK."

 

Question: Shouldn't all BUYERS (assuming this would be myself/retail trader/Guy C), desperate or not, be hitting the ASK, 100 percent of the time, since Guy C can only BUY from the ASK side? Why is he implying that some buyers (Guy C) would SELL to the BID (sell to Guy B)? Wouldn't only SELLERS (myself/retail trader/Guy C in separate trade scenario) SELL to the BID?

 

[Mario J 0]

Debbi, you can put your buy limit order at the ask (right side), but that would not be a limit order by definition. The exchange requires a true limit order to be away from the current market (inside bid/ask). Otherwise your order would TAKE liquidity instead of providing it. Not sure thats would you're looking for. The reason to buy the bid could be the trader wants to get filled deeper in order to get a better price and/or wants to lower his commissions by getting paid for adding liquidity.

Edited January 21, 2020 by Mario J