Understanding the Order Book
Last updated
Last updated
Understanding the order book is crucial for traders that wish to make the most of Predict. Getting to grips with how it works will help you place limit orders, which, in turn, can earn you points and Blast Gold.
A limit order differs from a market order in that it is only triggered when the price of your limit order reaches the top bid / lowest ask and another user decides to "take" your order. It will sit on the order book until executed. Conversely, a market order will immediately execute based on the current available limit orders available on the order book.
Let's suppose you're interested in buying YES shares for a given market, but you're reluctant to pay the 80¢ price it's currently trading at. You will, however, consider scooping a handful of shares up should the price dip to 75¢.
You create a limit order to this effect — stating your intention to buy 500 YES shares at 75¢. This is added to the order book, along with all the other currently active limit orders.
In a 'liquid' market, we'd expect the order book to look something like this:
75¢ | 90,000 shares | $67,500 total
79¢ | 100,000 shares | $79,000 total
74¢ | 80,000 shares | $59,200 total
78¢ | 80,000 shares | $62,400 total
73¢ | 50,000 shares | $36,500 total
77¢ | 70,000 shares | $53,900 total
72¢ | 20,000 shares | $14,400 total
76¢ | 62,000 shares | $47,120 total
The Bids column aggregates the limit orders looking to buy YES shares, while the Asks column aggregates those looking to sell YES shares:
The Bids column represents the highest price buyers are willing to pay
The Asks column represents the lowest price sellers are willing to accept
Observe that the highest bid and lowest ask don't match up in our example. This discrepancy is called a spread. The more liquid a market, the smaller the spread is — meaning less price impact on transactions.
When orders from both columns hit the same price, the trade is automatically executed by Predict's matching engine. Note the share quantity plays a role here — to fill an order in its entirety, the seller must offer the number of shares that the buyer desires. Otherwise, the order will only be partially filled, and the buyer must wait for further matches to get the rest of their shares.
This same market will treat NO shares exactly the same way — YES asks are equivalent to NO bids, and YES bids are equivalent to NO asks.
By default, your limit orders will remain open until they're filled or canceled. You can, however, set it to expire after a period of time by using the Order Expiry drop-down.
