Archive for stock market
Adding Liquidity / Removing Liquidity Explanation
Posted by: | CommentsHey Traders,
Alot of people have recently asked me for an explanation of adding/removing liquidity in the stock market as well as how orders are routed. Below is a basic description with the resulting rebates as well as additional charges above your commission rate that many don’t realize even exist:
Adding vs. Taking Liquidity vs. Outbound.
The term “Add Liquidity” refers to sending an order to an ECN at a price which is not immediately executable. The order sits on an ECN’s order book until the market moves to that price, at which point the order executes. You can think of this as a limit order.
EXAMPLE: The inside market in XYZ is $20.01 X $20.05. If you place a buy order at $20.04 or below, the order will sit on the order book until another market participant is willing to sell at that price. Alternately, you can place a sell order at $20.02 or higher and your order will sit on the order book until another market participant is willing to buy at that price. Buying on the bid and selling at the offer is referred to as adding liquidity.
The term “Remove Liquidity” refers to sending an order at a price which is immediately executable. A buy order is sent with a price equal to or higher than the current offer and a sell order is priced equal to or lower than the current bid. You can think of this as a market or marketable limit order.
EXAMPLE: Using the example from above, the inside market in XYZ is $20.01 X $20.05. If you place a buy order at $20.05 or higher you will immediately execute at the current offer. If you place a sell order at $20.01 or lower you will immediately execute on the current bid. Buying at the offer or selling on the bid is referred to as removing liquidity. (Keep in mind that some venues can have hidden orders. Executions against existing hidden orders are still considered removing liquidity).
The term “Outbound” refers to an order which is routed from its original destination to another venue.
EXAMPLE: You send an order to ARCA to buy XYZ at $20.05 while NSDQ is displaying an offer to sell at $20.04. ARCA will route your order to NSDQ for execution at the better price. This order routing is referred to as outbound.
Hope that helps! Cheers!
Market Reflections – July 2009
Posted by: | CommentsThe stock market has had a good run since March 9th. Both the S&P 500 and the TSX Composite have climbed 36%. More recently the S&P 500 has shown signs of tiring and has been bumping up against the 940-950 range. Currently the index sits at 900. This point is at both the 50 and 200 day moving averages, with the market moving sideways for the last while a breakdown at this point would have negative implications in the market. Conversely, if the market is able to break through resistance and the downward sloping channel line on strong volume, the short-term outlook for the market would be positive.
Given that we are in the non-favourable season (beginning of May to the end of October) of the market, a strong run in the index has a low probability of happening. Over the next two weeks it is possible for the markets to produce positive action as the market can sometimes extend a top into mid-July and the time around Independence Day tends to be positive (discussed later in newsletter). It is the time period after July 19th that will present possible corrections of magnitude.
Another indicator that has recently turned down is the NYSE – BPI. After topping out at 75, the indicator is now sitting at 58 – a negative indication.
The Bullish Percent Index (BPI) is a popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. Bullish Percent levels that are above 70% are considered overbought, whereas levels below 30% are considered oversold. Strong buy signals occur when the Bullish Percent Index falls below 30% and then reverses up by at least 6%. Conversely, promising sell signals occur when it goes above 70%, and then reverses down by at least 6% (Source: Stockcharts.com).
Welcome to DayTraderGuru.com
Posted by: | CommentsI have finally finished this site and will later be adding my daily trades. On the right hand side of this page you will find news for both gold and oil as well as general business news. If you wish to have some other type of news, let me know. Since this site is new, it will take time to have everything uploaded. I will also be uploading eBooks for free as a gift.
If you are looking for free charts, go to Xovian.com, its my old site. I will be using this site for now on for anything else.
