Limit orders

[rsmith911]

This is a basic question (I use ECN demo accounts) since I don't understand exactly how orders are filled etc. If I place a buy limit order 1 point below the bid price and then the price moves down I now have the best bid (I can see it change). If a market sell order now comes in then my order hopefully will be filled. What happens if someone else has also placed a buy limit order at the same price? Who wins? How exactly are orders matched up? I've read that it is unlikely for my order to get filled until the ask price falls to match my buy limit order. At this time presumably a sell limit order must match mine and they get paired off. What I don't get is how the bid price can fall even when I have the best bid. i.e. for my limit order to get executed the ask price has to fall. As I understand it this happens by people placing lower sell limit orders. But how can the bid price also fall when I have the best bid? I can see this happen on my demo account and the whole spread moves down and my order gets hit but I don't understand how. I would have thought for my order to get executed in this way at the point of execution the ask and bid must be the same. Thanks!

 

[Shakone]

If you had a bid at say 10, and ask at 11, then you 'could' get filled at 10, if someone wants to sell at market, then they are selling at 10, possibly to you, possibly to someone else. But on a demo, it's not going to know whether you got filled there, it can't say your bid got hit because your bid doesn't exist in the real market, it's demo. Similarly, it's sending you data of the bid and ask, but you having the best bid on demo, isn't going to change the bid of the real market from a demo account. Also even with an ECN, for forex you're not trading the actual market. So while the ECN may accommodate your bid and adjust the spread, that's not the real market spread.

 

[Rhody Trader]

What happens if someone else has also placed a buy limit order at the same price? Who wins? How exactly are orders matched up?

Orders are filled in the order they were placed, so if you put in your order before anyone else and a market sell took place you would get filled.

I've read that it is unlikely for my order to get filled until the ask price falls to match my buy limit order.

The ask falling to match your buy limit is effectively the same thing as a market sell order being executed.

 

[gain247]

Well, as Rhody Trader explained, it really depends on where in the order book your limit order is located. Demo account (typically) doesn't have any filter what so ever regarding how you limit order would execute related to other orders at the same price. Also, it depends heavily on the instrument/contract traded on how thin or crowded the order book is at any price level. Eg, with ES there can easily be several hundred of orders in front of you.

 

[CharlesBakerfx]

I found a very good article about stop & limit orders that may help you. How to place stop limit order and improve trading results
Enjoy !