How Does trading on the Exchanges Work?

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Pardon my Ignorance but can somebody explain the basics

Of how trading (Bid Buy/Bid Sell) works of the common exchanges

www.mtgox.com www.btc-e.com

Aslo some of the common ways people or conditions suppress or raise the price of LTC & BTC

Thanks In Advance

BitCoin New Guy

Posted 2013-01-03T04:07:09.717

Reputation: 868

Answers

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Currency exchanges are implemented through programs called order-matching engines. When a new order is entered, a buy order for example, the matching engine checks to see if there is a match on the other side, a sell order at the right price.

Bid is the price a user is willing to pay and Ask is the price at which a seller is willing to sell. The difference between the two is called the spread. Most exchanges try to minimize the spread. The price often quoted is midway between the highest bid and the lowest ask.

Here are some examples of matching engines: https://github.com/jordanbaucke/Limit-Order-Book

Kinnard Hockenhull

Posted 2013-01-03T04:07:09.717

Reputation: 2 335

@KinnardHockenhull, what happens when someone wants to buy at 101 and someone wants to sell at 100? Does the trade get executed at 101 or 102 then? – Pacerier – 2013-08-15T15:31:42.677

Much of this depends on the market. Different markets have different rules about execution. Some bitcoin markets have been accused of executing the sell at 101 and the buy at 102 and keeping the spread. Most people coming from traditional finance would find that outrageous. – Kinnard Hockenhull – 2013-08-16T11:45:20.410

@Pacerier Having two offers, one with 100 and the other with 101 where did you get 102 from? – Piotr Dobrogost – 2013-11-29T19:52:26.863

@PiotrDobrogost, what I meant was 100 vs 101 – Pacerier – 2013-11-30T03:54:46.813

@KinnardHockenhull, So exactly which exchange daringly do something like that!? – Pacerier – 2013-11-30T03:55:18.037

What are some of the common ways to manipulate the market ?? – BitCoin New Guy – 2013-01-03T08:51:41.920

Actually the "price often quoted" is the "last transaction" price. – o0'. – 2013-01-03T09:02:05.780

1SO people can do trades of .0001 BTC with a lower ask price to keep the SPOT price down ? There is a BOT doing that on BTC-e for BTC & LTC – BitCoin New Guy – 2013-01-03T09:37:33.393

Interesting, are you sure its a bot? What are there transaction fees? – Kinnard Hockenhull – 2013-01-03T16:16:12.483

.5% ...It keeps doing .001 BTC for a sell price straight after lats trade & at a lower price hmmm – BitCoin New Guy – 2013-01-03T21:01:48.250