Forum Archive Index - February 2000

[Mike Nelson <bb2345@pop.ihug.co.nz>]

Hi Ritchie,

Thanks for that very good explanation. I can see what you mean. I take it
from your comments then that markets overseas (some) do show market depth
online ?

Regards,

MN


At 04:08 AM 09/02/00 PST, you wrote:
>
>
>
>Hi Mike,
>Market Depth is the Ques of buyers and sellers who have registered their 
>interest at either buying or selling at a "limit" price.
>For example , if the last sale for Aql was 18c and you can see that there is 
>a willing buyer at 18c, and a willing seller at 18.2c, then by looking at 
>the market depth I would know how big the que of buyers were at the price of 
>18c. This is significant, as if there are 5 buyers wanting 1 million shares 
>between them or even if there were 20 buyers wanting 1 million shares, I can 
>see that the demand is strong at this level and will take considerable 
>selling pressure to break through that demand. If I were buying a share I 
>would then put in an offer of 18.1c and go to the top of the que or possibly 
>hit the seller at 18.2c...........particularly if I looked at market depth 
>of sellers and discovered only one at 18.2c selling 50,000 shares, and that 
>the next seller was registered at 19c for 100,000.etc
>If I look up and down the que I might discover that at 17.5c there are 5 
>milion shares wanted to buy, and at 22c there are 10 million to sell. From 
>this information I could derieve that resistance on the buy side is at 17.5 
>so if I did believe the price would fall, I would need to sit in the que 
>somewhere up above that if I want any real opportunity to buy them. 
>Similarly, if I am looking to sell, I would want to do so at 21.5c or even 
>21c. The general rule of thumb is that as a share gets closer to a 
>resistance price it becomes increasingly more difficult to make the 
>sell/buy. The reason for this is the accumulative effect of others trying to 
>purchase or sell at just below/above the resistance price....( in the above 
>cases being 22c and 17.5c ), and in themselves as a group they create a new 
>resistance price by share volume through numbers, so the next group of 
>individuals will come in under/above them and so on. On this basis all 
>things being ordinary the price should be volatile in  a semi balanced 
>manner always returning to some point that the market deems to be fair 
>value.
>Disclosure : I don't however feel the NZ market often lends itself to the 
>expression " all things being equal", very often.
>
>To get market depth in NZ currently you need to ring a Broker as far as I 
>know....and it is well worth the extra commission you might have to pay to 
>get it......ie using a full service broker.
>
>Hope that helps!
>Ritchie
>
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