Basic Resource on How Price Moves

Bloodhound

Bloodhound

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I'm hoping someone may be able to help. I'm showing someone the ropes at the moment and something that they are getting very stuck on (mainly because I am struggling to explain it properly) is the basic structure of the order book and how prices actually move. Despite lots of searching on here and google and I can't find any decent resources which explain the nuts and bolts in an easily understandable way.

Any suggestions would be gratefully received.
 
Mightymayesy that is a good starting point for new traders with regards to the order types available to the trader, but I think beachtrader is talking more about the effects that these types of orders have on price movement within the order book.

Beachtrader, I know you know how prices move, and the fact that you are helping someone with these essential core basics at the start of showing them the ropes proves that you understand the importance/value of such understanding. Ask most traders why prices moves up and you will most likely get the answer that "there are more buyers than sellers". You know that this is not true, and you want to show your companion why this is not the case.

The fact that the information can not be found on google etc is no surprise. What you are trying to do is show your companion what true trading is really about, and you must deliver this information in your own way. Can you not create an order book (say like a chessboard) and then go through proceedings step by step? This way he/she will get more of a hands on approach to help understand your explanations.

Good luck to you, it sounds very interesting:smart:
 
Beachtrader said:
I'm hoping someone may be able to help. I'm showing someone the ropes at the moment and something that they are getting very stuck on (mainly because I am struggling to explain it properly) is the basic structure of the order book and how prices actually move. Despite lots of searching on here and google and I can't find any decent resources which explain the nuts and bolts in an easily understandable way.

Any suggestions would be gratefully received.
Click to expand...

Stock Prices
Explains how prices are determined, supply and demand etc.

Carol Osler also has some papers on the subject: http://people.brandeis.edu/~cosler/
 
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erm, I disagree...

Ask most traders why prices moves up and you will most likely get the answer that "there are more buyers than sellers". You know that this is not true, and you want to show your companion why this is not the case.

Other than staying out of the market to affect prices indirectly markets are directly affected by S&D to obtain a market equilibrium or as Smith puts it, "the invisible hand affect".

The order book won't affect the price in any way until the trade is executed so I would have to disagree with that reasoning. Thus, there is no way to see the affect on prices of an order book (assuming you have access to it) other than to gauge general sentiment, anticipated liquidity, orders aligned with economic releases, future contracts etc...

I'm not sure what Beachtrader is asking or you are clarifying? For example, could you price an iceberg order or a block trade in anticipation of being filled? That is back-to-the future type work...

S.
 
Firstly thank you all for your replies, resources etc.

Thanks Mightymaysey for the pdf - excellent background reading.

Mr. X - I haven't read Osler for ages but I fear that it might be a little highbrow for what I am trying to get across. The previous article you mentioned on supply and demand , coupled with MightyMaysey's comments are pretty much bang on though in describing how I trade and the methodology I am trying to teach. (As an aside I fail to understand how anyone can trade without reference to the supply / demand equation but long may there be those who don't - otherwise a lot of us would be out of a job!)

New Trader - I agree re politicians but see my remark above re traders which I hope you will agree with.

Hello Wallstreetwarrior - hope all is well with you. You've probably hit the nail on the head in terms of realising that I am guilty of a certain amount of laziness in not having constructed the chessboard for this chap I'm helping - it is in fact the chessboard that I was hoping to find online!

I think I am guilty, however, of having not asked the question correctly - apologies for that. Anyway here goes at asking it in a better way.

If we assume that prices will rise from a certain level because demand outstrips supply (I prefer to say bids exceed offers, rather than there are more buyers than sellers but that's semantics) can anyone think of a video which shows / explains this with reference to the orderbook. As I previously mentioned Mr. X's article explains the process perfectly in writing but I was hoping to find a video resource to make life easier for the person I am trying help.

It may seem like a strange question to be asking but I liken it to being asked why, if one lets go of an apple, it falls to the ground. We all know the answer but how many of us could really explain it? I am fully aware that orderflow goes a lot deeper than what I am trying to explain but I am trying to keep things very simple and find a decent reference point between the theory (Adam Smith) and the practice (what this looks like from an orderbook perspective).

I hope I am making some sense. Once again, many thanks for all your input.

BT
 
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wallstreetwarrior87 said:
Good luck to you, it sounds very interesting:smart:
Click to expand...

Trying to 'teach' someone to trade the way I trade is proving to be extremely beneficial in respect of my own trading (and I hope the guy I am helping as well!!). Not only has it offered much more clarity of thought in terms of how I approach each trade, but has also done wonders for my discipline - there is nothing better than having someone sitting there who you know is going to pull you up every time you bottle a trade, make a mistake, break rules etc.!!!
 
I have some stuff but its not public domain. I don't mind sharing it with you though.

Can you pm me a Skype I'd... probably better if we have a chat to see if it is a 'fit' first...
 
hey hey, what's the haps dude? Funnily enough I was just across the way from your beach last week, up in Kendwa

/off topic
 
was in town then paje most of the time but hit up the slopsfest at kendwa rocks for nye
 
rawrschach said:
was in town then paje most of the time but hit up the slopsfest at kendwa rocks for nye
Click to expand...

Just looked and they now have a website and seem to have spent some money on the place which is a shame. When I went there you needed 4wd and a reinforced sump. Prices seem to have gone up 5 times as well. Hope you had a good one?!
 
Ya, it is the prettiest beach but it's all hotels now, tarmac road all the way up to the north too so I prefer the east for seclusion. Seems to be turning into the ibiza of the island which is a shame but I guess eventually big money will move in and make a bunch of boutique hotels.

The mainland beaches and pemba/mafia still have great spots with nobody for miles

What I remember of the night was a mix of great times and v embarassing behaviour haha
 
Very, very sad but I guess it had to happen. Too nice a spot not to get ruined. Did you get your office in Dar set up? I wouldn't mind hot desking down that way!
 
Im further inland up north, mostly Arusha but I travel a lot. The only internet worth having here is 3G so my office is my bed pretty much...might have to move to Kenya to get real internet - even their 3g is way better but blegh, prefer it down here, much more chill
 
Not sure a move up north would be good atm imo. Seems like a bit of a wobble going on of late. I remember when 1 meg was about $4k a month..............
 
Ya there's that too, would prbs be best if I stayed out of Nbo if I did move. I've seen ads for 100meg and the 3G is great, coverage is awesome. In september I drove to Dadaab before **** hit the fan and it was ridiculous sitting in a tent in the desert dling tv shows at 300kbps ****ting our pants at every noise outside.
 
DionysusToast said:
I have some stuff but its not public domain. I don't mind sharing it with you though.

Can you pm me a Skype I'd... probably better if we have a chat to see if it is a 'fit' first...
Click to expand...

Hi DT,

Many thanks for the info. First class and exactly what I was looking for.

All the best

BT
 
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