Trading Basics

Probable runs on a orderbook style model to match orders across users.

Orderbook Basics: An orderbook maintains a list of all open buy and sell orders from users who placed limit orders. It’s displayed in two lists:

• Bids (Buy orders) – these are limit buy orders by users waiting to buy at or below a certain price. The highest bid is the highest price someone is willing to pay for a share

• Asks (Sell orders) – these are limit sell orders waiting to sell at or above a certain price. The lowest ask is the lowest price someone is willing to accept to sell a share

• The spread is the gap between the highest bid and lowest ask.

  • If the spread is small (say 49¢ bid, 51¢ ask), the market is very liquid and there’s only a 2¢ gap.

  • If the spread is large (say 40¢ bid, 60¢ ask), there’s low liquidity.

• Market orders will generally fill at the opposite side’s best price. For instance, if you place a market buy and the lowest ask is 95¢, you’ll buy at 95¢. If you place a market sell and the highest bid is 90¢, you’ll sell at 90¢.

Providing Liquidity: When you place a limit order, you become a “maker” in the market. You’re adding liquidity because you are offering to trade if someone meets your price. This helps markets run smoothly. Makers will be incentivised in several ways such as 0 fees, liquidity rewards program (to be launched soon) to encourage high liquidity in orderbook across markets.