Last updated on July 22nd, 2015
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How does order matching actually occur in the stock market?
Whenever you place an order in the stock market, your online broker will let you see all other orders currently queued for your chosen stock.
This is the order board or quote screen that identifies the Buying (Bid) and Selling (Ask) parties into each stock choice. This stock quote screen lists on the left column the desire to buy and on the right column the desire to sell, showing the respective volume levels (or size) at each bid price level.
The queue actually shows the precedence/sequence and thus of priority of execution of these orders, depending on their price, which you can use to adjust your own bid/offer price to get the desired priority.
For example, in the case above for SMDC, under the BID column, the order with the highest bidding price of 8.30 (with 31,700 shares) will be prioritized against those orders with bidding prices 8.29 and below, so it’s placed in the first row being the best buyer. How come he’s the best buyer? It’s because he has the highest bid price. It’s obvious. If you’re a seller with several buyers vying for the thing you sell, wouldn’t you prioritize that buyer who has the highest buying price?
When are orders matched?
You see it boils down to the order price. If you want to make sure that your order be executed (matched) right after posting it, you use the best bid price or lower (if you’re selling) or the best ask price or higher (if you’re buying) in your order. In this way, you become the best seller or best buyer respectively.
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