Making the actual trade

http://finance.kampungtalk.net/2008/01/making-actual-trade

Now that you have decided that you want to invest, and you have considered what is the investment style you would like to try, it is time to make the actual trade.

In Singapore, the stock market is open every weekday from 9am to 5pm, with lunch breaks at 12.30pm to 2.00pm. Before the market opens there is this session called pre-open from 8.30am to 8.59am. During this pre-open period, no trades are done, but people are allowed to submit their orders to queue, such that all these orders will then get done simultaneously at 8.59am before the market officially opens.

There is also pre-open session from 12.30pm to 1.59pm where people can queue in orders before they get executed at 1.59pm, where the afternoon session will commence. Finally, there is a pre-close session at 5.01pm to 5.05pm. These orders will then be matched at 5.06pm to close the day's trading activities. Depending on your brokerage firm, you would be able to queue for the next days session from 5.30pm or 6.00pm onwards.

Without going into too many advanced topics, how the pre-open, pre-close, the matching sessions and how to jump queue will be separated into another post. Watch out for it!

Executing a trade (a.k.a what do all those numbers on the screen mean?)
When you have decided which stock you would like to buy, the first thing you would do is to find the details of its current price.



In this example, the stock we are looking at is Singtel. Some numbers to note are, Last (3.86), BVol(289K), Buy(3.86), Sell(3.87), SVol(17K), Vol(28,715K)

Last basically means the last done price, or the most recent price that Singtel shares were transacted. Vol basically shows the total amount of stocks that has been executed today.

As you would notice, the volume numbers have a K behind it. The reason for this is that shares are traded in 'lot sizes'. In short, 'a lot' of Singtel shares is 1000 shares, thus, the smallest quantity of Singtel shares you can buy or sell at 1 time is 1 lot, or 1000 shares. That would mean 28,715K translates into 28,715 lots, or 28,715,000 shares, of Singtel has been transacted today,

Remember our fruits market example about queuing? In this case, there are 289 orders (or people) queueing to buy Singtel at 3.86, and 17 orders (or people) queueing to sell Singtel at 3.87. It is not displayed here, but in fact, there are people queueing to buy Singtel at 3.85, 3.84, 3.83, etc, and there are people queueing to sell Singtel at 3.88, 3.89, 3.90 and so on. This is called market depth.

Lets say now you have decided you want to buy Singtel. You have 2 options really.

1) You can choose to buy it immediately. What this means is that you go to the guy at the queue selling at 3.87, and offer to buy their shares from them. If you decide to buy 10,000 (or 10 lots) of it, the SVol(K) will decrease by 10. Resulting in a final number of 7. the Vol(K) column will correspondingly increase by 10, because that is the total volume of Singtel shares transacted for the day.

2) You think that you can get it at a better price. In this scenario, you will decide what is the price you are willing to pay for it, and stand in that queue for buyers. Assuming that 3.86 is a fair price you decide to pay, and you want to buy 10,000 (or 10 lots) of Singtel shares, what happens is tha the BVol(K) will increase by 10 to 299. As with all queues, you are now at the back of the queue. What this means is that there must be enough people who wants to sell Singtel shares at 3.86 until it reaches your queue position.

Now assuming you want to buy 20,000 (or 20 lots) of Singtel instead. You decide 3.87 is a fair price to pay, however, there are only 17 lots available for sale at 3.87. What happens?

The same mechanism comes into play. You walk up to the 17 sellers at 3.87, buy all the 17 lots. When that happens, you have 3 more lots you would like to buy. Now, you become the buyer at 3.87. Remember there are ready sellers at 3.88, 3.89, 3.90 and beyond? What happens now is, the number 3.86 would disappear from the Buy column, and it would be replaced with 3.87. The BVol(K), would now become 3, since that is the total number of lots willing to buy at 3.87. The Sell column would then be replaced with 3.88, and the SVol would be the number of sellers willing to sell at 3.88.

Really, its all just like a fruits market.

http://finance.kampungtalk.net/2008/01/making-actual-trade