Is it possible to buy or sell highler/lower than current market price?

Hi guys,
Its is possible to sell shares for lower than CMP, or buy shares for higher than CMP? Common sense tells me its should be possible, but just want somebody to confirm. I am asking this to understand the concept of markup and markdown.

Thanks,
-Bunny.

Not possible, but why would u want to do that?

Thanks for the reply.
I asked because I wanted to understand how markup or markdown is done.

But one more question to bother your. Why can't it be done? I means the buyer is willing to buy for a higher rate then quoted by the seller. So infact it should be a good deal, right?

Hi bunny,

From my logic it looks not possible.

Market works with a definite logic. All sellers will be in the 'Descending price order' queue & all Buyers in the 'Ascending price order' queue. For a deal to strike the best buyer price has to match with the best seller price.

Regards
Chachi

Thats how the order matching mechanism of the exchange works. If you watch the best 5 bids vs offers, you will get the idea.

If u are willing to pay a higher rate but the seller is offering at a lesser rate u automatically get to buy at a better price, and of course prices cannot be manipulated.

Hi bunny,

What I could understand from Markup & Markdown is that, smart money players create a artificial vacuum in the supply & demand in order to manipulate.

I understand like this. Suppose a smart money player is playing a share. He is holding most of the floating shares and will be building his shares by buying other's. Slowly all the floating shares will vanish or will reduce to a large extent. Now when it is convenient for him he starts supplying to the market in installments, his shares at a higher rate (markup) thus 'creating a demand'. Similarly he can play the other way.

Assume Smartmoney player holding large percentage of shares, and when the demand is for say 100 Rs, he will be putting his shares at 115 Rs. Meanwhile if any small investors holding very few shares is ready to supply at 110 Rs, he will buy that to create a vacuum. Finally a stage is set when the ask price slowly crawls upto his sell price of 115 Rs and he will succeed in selling them to 'his price'. Many times when the ask price moves to his price, he may withdraw his sell quantity to create more demand.

Regards
Chachi

i am a n00b myself, so please dont think this answer is in any way correct.

theoretically, it SHOULD be possible to buy/sell at a price different from CMP. because the exchange only matches buyers and sellers who are quoting the same price.

for instance, stock A is trading at rs 10. but i am willing to sell it for rs 8 (lets also assume im an insider and i know the company is going to tank ). if you are in the market to buy, and you enter your order to buy as rs 8, the exchange might match our orders.

purely conjecture. any experienced people are welcome to correct me.

Thanks everybody for your replies.

What I now think is that, to understand exactly how markup/markdown is done, we may need to understand the order execution algorithm.

For ex: How is the Last Trade Price(LTP) decided. I am not sure of it, but I think it is the price at which max. no. of shares would be transacted. Suppose the exchange has received orders to buy 100 shares @ 25, 400@ 25.6, [email protected], the LTP will be 25.6 because it clears max amount of order book as compared to other two orders. This thinking of mine is also supported by the fact that to make a big move, big volumes(orders) are necessary. If big orders were not necessary, the intraday high-low values could be easily manipulated by any person. For instance a person may be willing to sell one equity share or RELIANCE at Re. 1. Does that mean exchange will show Re. 1 as low price? Not at all!

Hi bunny,

I will put few points of mine.....

In your example above LTP is 25.6 because it is the best buying pricing (who is ready to pay bit more - should be given first priority) and there will be sellers at this price. It is not because it clears max volume.

If what you wrote is correct, then suppose if I am ready to pay 25.75 Rs but volume of my buying is only 50..do u mean to say I wont be given priority just because there is a person waiting to buy 400 @ 25.6?

To make big move, the supply has to be consumed as and when available which will create more and more demand and price will move steadily upward. This demand can be either by Big Orders (no. of Orders and Volume) or Big size Orders (Smart Money).

If the person puts his sell of reliance for 1 Rs, either Order will be rejected as the price is unrealistic (need to check this aspect) or his shares will be sold at the best ask price, because he is ready to sell at 1 Re where as another person is ready to give him 2000 rs.

Regards
Chachi

I do make such errors and my orders are rejected,by the broker only it does not reach the exchange.But I have heard some broker may craeate a acceptance without forwarding to exchange,but I dont know how one can avoid traceblity and exchange audits