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DMA Quote Screens
The Touch Strip
Company ABC
Put simply the ‘touch strip’ shows the BEST buying and BEST selling price or the HIGHEST bid or LOWEST offer at any one time. The touch strip shown above has six separate pieces of information.
i) The bid price is shown as 377.25 and the offer is 378.5.
ii) Somebody has placed an order DIRECTLY in the market to BUY (or BID for) 41,402 shares at 377.25. This means that although there may be order to buy at lower prices, because this is the BEST BID it has become the TOUCH or MARKET price.
iii) The price of 378.5p represents the BEST OFFER or an order that somebody has placed on L2 to SELL 50,000 shares at 378.5p. The figure 1 to the right of this number shows that the order for 50,000 shares is comprised of 1 order.
This is an important concept to grasp because for most private traders or investors it is the complete opposite to the usual understanding of the bid/offer price. To illustrate this further, imagine you went to your local stockbroker and had 41,402 shares in ABC to sell. He would look at the market price and quote 377.25p as the best price you would receive. However, many people often wonder where their shares go when somebody buys them and how it is that they can sell them so easily. The answer is simply that for every seller there has to be a buyer and vice versa hence when the stockbrokers sold the shares, somebody had to be willing to buy them at 377.25p i.e somebody had an order on SETS to buy 41402 shares at 377.25.
The Order Book
Figure 1.0 – Example of the order book for Reuters (RTR-LON)
The screen above now shows the MARKET DEPTH or often referred to as the ORDER BOOK. Many of the trading strategies using L2 covered in later sections rely heavily on being able to interpret the order book correctly. It may be worthwhile for you to make sure that you are happy with the concepts already covered, before moving on to real time trading.
In the example above, which is actually the order book for Reuters (RTR-LON) trading on the FTSE 100, you can see that there are eight rows of further information below the ‘touch strip’. What this information tells you is EXACTLY where peoples buying and selling interest is i.e it provides a clear, transparent mechanism for identifying (and therefore interpreting) the weight of interest in a stock. For example, the touch strip and the row below it shows you the best buying and selling price at that moment in time, and the order/s which make up that price. Which price is relevant to you depends on whether you are trading AT MARKET or placing your order into the market via SETS. We will Nnow cover each of these in turn.
Click below for more on Direct Market Access CFD Trading:
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Warning: Trading Contracts for Differences (CFDs), Futures and spread betting carries a high level of risk to your capital, and is not suitable for all investors. Only speculate with money you can afford to lose. Trading or placing any bets can result in consumers incurring liabilities in excess of their initial stake. Please ensure you fully understand the risks, and seek independent advice if necessary. Equitrade CFDs is a trading name of Equitrade Markets Ltd, a company authorised by the FSA to provide advice on spread betting, CFDs, futures. options and rolling spot foreign exchange. |
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