Large BUY LIMIT orders' effect on a stock's price
Traders sometimes look at the depth of the book (number of outstanding limit orders) to try and gauge the sentiment of the market or otherwise use this information to formulate their strategy.  If there was a large outstanding buy order at $49.50, there's a decent chance this could increase the price by influencing other traders. However, a limit order at $2 is like an amazon.com price of $200,000 for a book.  It's so far away from realistic that it is ignored.  People would think it is an error. Submitting this type of order is perfectly legal.  If the stock is extremely thinly traded, it might even be encouraged because if someone wanted to sell a bunch and did a really bad job of it, the price could conceivably fall that far and the limit order would be adding liquidity.  I guess.  Your example is pretty extreme. It is not uncommon for there to be limit orders on the book that are not very close to the trading price.  They just sit around.  The majority of trades are done by algorithmic traders and institutional traders and they don't tend to do this, but a retail investor may choose to submit an order like that, just hoping against hope. Also, buy orders are not likely to push prices down, no matter what their price is.  A sell order, yes (even if it isn't executed). If an offered price is below what people are willing to sell for, it is simply ignored. (What happens if I offer to buy lots of cars as long as I only have to pay $2 each? Same thing.)
TD will only sell the stock for you if there's a buyer. There was a buyer, for at least one transaction of at least one stock at 96.66. But who said there were more? Obviously, the stocks later fell, i.e.: there were not that many buyers as there were sellers. What I'm saying is that once the stock passed/reached the limit, the order becomes an active order. But it doesn't become the only active order. It is added to the list, and to the bottom of that list. Obviously, in this case, there were not enough buyers to go through the whole list and get to your order, and since it was a limit order - it would only execute with the limit price you put. Once the price went down you got out of luck.  That said, there could of course be a possibility of a system failure. But given the story of the market behavior - it just looks like you miscalculated and lost on a bet. I assume you're talking about a sell order, not a buy order. When you place a limit sell order, your order is guaranteed to be placed at that price or higher.  If the market is currently trading much higher than the price of your sell order, then your mistakenly low limit order will be essentially a market order, and will be filled at  the current bid price. So the only way this is a problem is if you want to place a limit sell that is much higher than the current market, but mistakenly place a limit lower than the current market. "Orders large enough to buy down the current Bid and Ask Book are common. This is the essential strategy through which larger traders ""Strip"" the Bid or Ask in order to excite motion in a direction that is favorable to their interests. Smaller traders will often focus on low float/small cap tickers, as both conditions tend to favor volatility on relatively small volume." "There tends to be high volume around big changes in stock price. The volume of a stock does not remain constant and the term ""fat fingers"" can influence price.--> http://www.bloomberg.com/news/2014-10-01/that-japanese-fat-finger-can-absolutely-happen-in-u-s-.html That being said keshlam is 99% right when it comes to a stock moving when their is no news or earnings announcements. Check out these papers. http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.2010.01285.x/full They do a time series analysis to try and predict future prices off of past demand during news events. They forecast using auto-regressive models.  google ""forecasting autoregressive model"" and the upenn lecture will be helpful. I would post another link but I cannot because I do not have enough rep/ This is more of a quant question. Hope this helps. JL" It is unlikely that buying 100 shares will have any effect on a stock's price, unless the stock's average trading volume is incredibly low.  That being said, no matter how many share you buy, there's no way to know what the impact on the price will be, because that's only one factor in how shares are priced.  If anyone could figure out the answer to your question then they'd be extremely rich, because they'd simply watch for big share trades and then buy those stocks on the way up. The market makers who actually execute the trades are the ones who set the prices, and most stocks have multiple market makers trading the stock, so the bid/ask you see is the highest bid and lowest ask.  The market makers set the price based on what the trend of the stock is.  If, for instance, there's a large number of sell orders against a stock, the market makers will start dropping the bid prices as they fill execution orders, and as they see buy orders increase, they'll raise ask prices as they fill execution orders.  The market makers earn the difference between what they paid to buy someone's stock who was selling and what they get from someone else who buys it. This is a simplified explanation, so pro traders, don't beat me up! (grin) So, basically, it takes quite a bit of share volume in one direction or another to affect a stock's price.  I can guarantee a 100-share trade wouldn't even be noticed by market makers. I hope this helps. Good luck! "It's not necessarily bad but it can cause the stock price to become a lot more volatile. Depends on which side of the bet you're on ;) Suppose a hedge fund manager thinks a company is poorly run. He may buy a ton of shares so that he can get rid of the current CEO and replace it with his/her own. For the hedge fund and others long on the stock, this is good. Those who are trading options or using some short-term strategies could get screwed because of the sudden volatility.  My next point is related to the above. What is the intrinsic value of a stock? The current price of a stock is the equilibrium of all investor's perception of the stock's value. Professionals make up a value for a stock using models such as DCF. Once they do so they trade based on what they believe the value of the stock is. You might calculate a stock is worth 70 and I believe it's 80 so the stock price is going to fluctuate a bit but it should keep within that range (assuming we're the only investors). Then comes a hedge fund manager, say Carl Icahn, and discloses a stake in our stock. ""Wow, the stock must be really valuable!"" Everyone starts buying this stock so up it goes to 90, simply because the guy who seems to know what he's doing bought it. The point here is that now it's not trading based on intrinsic value, now it's purely psychological. Ie. it's now a momentum stock, which you have no idea when it'll crash. Look at Tesla, Netflix, or just google momentum stocks. All the big crashes in stock prices happen when these big funds unload their stocks. A surge in supply will cut the price. The problem is you can't predict when some fund manager will decide to sell some stake of his.  Tying everything together is liquidity. The more liquid a stock is, the easier it is to obtain and the less volatile it is. The more people playing the game, with not too big shares of stock, the faster the price will converge to some equilibrium and with less volatility. Institutional investors take away liquidity." Firstly what are you trading that you could lose more than you put in? If you are simply trading stocks you will not lose more than you put in, unless you are trading on margin. A limit order is basically that, a limit on the maximum price you want your buy order bought at or the minimum price you want your sell order sold at. If you can't be glued to the screen all day when you place a limit order, and the market moves the opposite way, you may miss out on your order being executed. Even if you can be in front of the screen all day, you then have to decide if you want to chase the market of miss out on your purchase or sale. For example, if a stock is trading at $10.10 and you put a limit buy order to buy 1000 shares at or below $10.00 and the price keeps moving up to $10.20, then $10.30 and then $10.50, until it closes the day at $11.00. You then have the choice during the day to miss out on buying the shares or to increase your limit order in order to buy at a higher price. Sometime if the stock is not very liquid, i.e. it does not trade very often and has low volume, the price may hit $10.00 and you may only have part of your order executed, say 500 out of your 1000 shares were bought. This may mean that you may have to increase the price of your remaining order or be happy with only buying 500 shares instead of 1000. The same can happen when you are selling (but in reverse obviously). With market order, however, you are placing a buy order to buy at the next bid price in the depth or a sell order to sell at the next offer price in the depth. See the market depth table below:  Note that this price depth table is taken before market open so it seems that the stock is somewhat illiquid with a large gap between the first and second prices in the buyers (bid) prices. When the market opened this gap is closed, as WBC is a major Australian bank and is quite liquid. (the table is for demonstration purposes only). If we pretend that the market was currently open and saw the current market depth for WBC as above, you could decide to place a limit sell order to sell 1000 shares at say $29.91. You would sell 100 shares straight away but your remaining 900 sell order will remain at the top of the Sellers list. If other Buyers come in at $29.91 you may get your whole sale completed, however, if no other Buyers place orders above $29.80 and other Sellers come into the market with sell orders below $29.91, your remaining order may never be executed. If instead you placed a market sell order you would immediately sell 100 shares at $29.91 and the remaining 900 shares at $29.80. (so you would be $99 or just over 0.3% worse off than if you were able to sell the full 1000 shares at $29.91). The question is how low would you have had to lower your limit order price if the price for WBC kept on falling and you had to sell that day? There are risks with whichever type of order you use. You need to determine what the purpose of your order is. Is it to get in or out of the market as soon as possible with the possibility of giving a little bit back to the market? Or is it to get the price you want no matter how long it takes you? That is you are willing to miss out on buying the shares (can miss out on a good buy if the price keeps rising for weeks or months or even years) or you are willing to miss out on selling them right now and can wait for the price to come back up to the price you were willing to sell at (where you may miss out on selling the shares at a good price and they keep on falling and you give back all your profits and more). Just before the onset of the GFC I sold some shares (which I had bought a few years earlier at $3.40) through a market order for $5.96. It had traded just above $6 a few days earlier, but if instead of a market order I had placed a limit order to sell at $6.00 or more I would have missed out on the sale. The price never went back up  to $6 or above, and the following week it started dropping very quickly. It is now trading at about $1.30 and has never gone back above $2.00 (5.5 years later). So to me placing a limit order in this case was very risky. In order: A seller of the stock (duh!). You don't know who or why this stock was sold. It could be any reason, and is of no concern of yours. It doesn't matter. Investors (pension funds, hedge funds, individual investors, employees, management) sell stock for many reasons: need cash, litigation, differing objectives, sector rotation, etc. To you, this does not matter. Yes, it does affect stock market prices: If you were not willing to buy that amount of shares, and there were no other buyers at that price, the seller would likely choose to lower the price offered. By your purchase, you are supporting the price. "That article, like almost any article written by a non-expert and quoting only ""research"" from lobbying groups, hugely misses the point. The vast majority of orders that end up being cancelled are cancelled as a standard part of exchanges' official market-maker programs. Each exchange wants you and me to know that it has liquidity -- that when we go to buy or sell some stock, there will be someone waiting on the other side of the trade.  So the exchange pays (via lowered fees or even rebates) hundreds of registered market makers to constantly have orders resting in each product's order book within a few ticks of the current NBBO or the last trade price.  That way, if everyone else should suddenly disappear from the market, you and I will still be able to trade our shares for a price somewhat close to the last trade price. But market makers who are simply acting in this ""backstop"" role don't actually want to have their orders filled, because those orders will almost always lose them money. So as prices rise and fall (as much as tens of times per second), the market makers need to cancel their resting orders (so they don't get filled) and add new ones at new prices (so they meet their obligations to the exchange).  And because the number of orders resting in any given product's order book is vastly larger than the number of actual trades that take place in any given time period, naturally the number of cancellations is also going to hugely outweigh the number of actual trades.  As much as 97% to 3% (or even more). But that's completely fine! You and I don't have to care about any of that.  We almost never need the market makers to be there to trade with us.  They're only there as a backstop.  There's almost always plenty of organic liquidity for us to trade against.  Only in the rare case where liquidity completely dries up do we really care that the registered market makers are there.  And in those cases (ideally) the market makers can't cancel their orders (depending on how well the exchange has set up its market maker program). So, to answer your question, the effect of standard order cancellation on a stock is essentially none.  If you were to visualize the resting orders in a product's book as prices moved up and down, you would essentially see a Gaussian distribution with mean at the last trade price, and it would move up and down with the price.  That ""movement"" is accomplished by cancellations followed by new orders. P.S. As always, keep in mind that your and my orders almost never actually make it to a real stock exchange anymore.  Nowadays they are almost always sent to brokers' and big banks' internal dark pools.  And in there you and I have no idea what shenanigans are going on.  As just one example, dark pools allow their operators and (for a fee) other institutional participants access to a feature called last look that allows them to cancel their resting order as late as after your order has been matched against it! :( Regarding the question in your comment ... If Alice is sending only bona fide orders (that is, only placing an order at time T if, given all the information she has at time T, she truly wants and intends for it to be filled) then her cancellation at a later time actually adds to the effectiveness of and public perception of the market as a tool for price discovery (which is its ultimate purpose). [In the following example imagine that there are no such things as trading fees or commissions or taxes.] Let's say Alice offers to buy AAPL at $99.99 when the rest of the market is trading it for $100.00.  By doing so she is casting her vote that the ""fair value"" of a share of AAPL is between $99.99 and $100.00. After all, if she thought the fair value of a share of AAPL was higher --  say, between $100.00 and $100.01 -- then she should be willing to pay $100.00 (because that's below fair value) and she should expect that other people in the market will not soon decide to sell to her at $99.99. If some time later Alice does decide that the fair value of AAPL is between $100.00 and $100.01 then she should definitely cancel her order at $99.99, for exactly the reason discussed above.  She probably won't get filled at $99.99, and by sitting there stubbornly she's missing out (potentially forever) on the possibility to make a profit. Through the simple act of cancelling her $99.99 order, Alice is once again casting a vote that she no longer thinks that's AAPL's fair value.  She is (very slightly) altering the collective opinion of the entire market as to what a share of AAPL is worth.  And if her cancellation then frees her up to place another order closer to her perceived fair value (say, at $100.00), then that's another vote for her honest optinion about AAPL's price. Since the whole goal of the market is to get a bunch of particpants to figure out the fair value of some financial instrument (or commodity, or smart phone, or advertising time, etc.), cancellations of honest votes from the past in order to replace them with new, better-informed honest votes in the present can only be a good thing for the market's effectiveness and perceived effectiveness. It's only when participants start sending non-honest votes (non bona fide orders) that things start to go off the rails.  That's what @DumbCoder was referring to in his comment on your original question." As stock prices have declined, the net worth of people has come down. Imagine owning a million shares of a stock worth $100/share. This is worth $100,000,000. Now, if the stock is suddenly trading at $50/share then some would say you have lost $50,000,000. The value of the stock is less. The uncertainty is always there as there are differences between one day's close and another day's open possibly. The sale price is likely to be near the last trade is what is being used here. If you place a market order to sell your stock, the price may move between the time the order is placed and when it is filled. There are limit orders that could be used if you want to control the minimum price you get though you give up that the order has to be filled as otherwise people could try to sell shares for millions of dollars that wouldn't work out well. If you look at a trade grid you can see how this happens. If there are enough bids to cover all shares currently on the sell side at a certain price, those shares will be bought and increased price quotes will be shown for the bids and ask. If there are enough bids to cover this price, those will get bought and higher prices will be shown and this process will repeat until the sell side has more power than the buy side. It seems like this process is going on all day long with momentum either on the upside or downside. But I think that much of this bidding and selling is automatic and is being done by large trading firms and high tech computers. I also feel that many of these bids and asks are already programmed to appear once there is a price change. So once one price gets bought, computers will put in higher bids to take over asks. It's like a virtual war between trading firms and their computers. When more money is on the buy side the stock will go up, and vice versa. I sort of feel like this high-frequency trading is detrimental to the markets and doesn't really give everyone a fair shot. Retail investors do not have the resources and knowledge in order to do this sort of high frequency trading. It also seems to go against certain free market principles in my opinion. I would say the most challenging fact for this assertion is that HFT firms operate with extremely limited capital bases. For a stock with say 10m shares ADV, even a very large and successful HFT strategy might use a position limit of no more than 5000 shares.  That is to say if you sum up and net the buys and sells for a stock across the day the HFT firm will never exceed 10,000 shares (2x position limits assuming it completely flipped) on a stock that trades 10,000,000 shares on a given day. The high volumes are attained through high turnover, the strategy might trade up to 500,000 shares (or 5% of the volume) attaining a 50x turnover.  But that brings me back to the original point. In the market microstructure literature market impact generally has been found to scale linearly or even sub-linearly for net volume executed.   If I alternate between thousands of 1 lot buy and sell orders, it would be very difficult for me to move the market because the market impact of every one of my buy orders roughly cancels the market impact of my almost exactly equal number of sell orders.   There might be a higher-order mechanism at work, but I'm genuinely curious what you think it might be. How could strategies that attain such small net positions have such out-sized impact on market direction? if I put a limit sell at $22.00 now, will it not sell until it's at $22.00 and I will continue to keep the stock? Basically yes. But note that brokers generally don't allow such limit orders to persist indefinitely. The default may even be that they're only valid until the end of the day, and usually the maximum validity is 30 or 60 days. It depends completely on the current order book for that security.  There is literally no telling how that buy order would move the price of a stock in general. But how does the quantity matching happen? For example, if I want to buy 1000 shares at $100, but there is only one seller to sell 10 shares at $100, what happens then? This depends on the type of order you've placed. If you placed a fill-or-kill order, your order to buy or sell a certain number of shares is routed to the trading floor for immediate execution. If the order cannot be immediately filled, it is cancelled (killed) automatically. Note that the order must be filled in its entirety. Partial fills are not allowed. In your example, your buy order wouldn't be filled because it couldn't be matched to a sell order of the same volume. This is similar to an all-or-none order, which is an order that contains  A condition instructing the broker to fill the order completely or not at all. If there is insufficient supply to meet the quantity requested by the order then it is canceled at the close of the market. In this case, if your order wasn't matched to an order of the same volume by the time the market closes, it's cancelled. If you simply placed a market/limit order, and (in the case of the limit order), part of your order was matched to another order with the right price, that part of your order will be filled, while the rest will remained unfilled.