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Can you explain me in detail, what affect the price on BTC-e ? I understand the mechanic, like if there is strong demand and limited supply the price goes up. But how does it work on BTC-e? Because to me it looks like the website is setting the price itself. There are lowest and highest ask prices.

Thanks

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This is exactly how a normal stock exchange works.

The quoted rate and the Buy and Ask prices are just driven by the supply and demand of people wanting to trade on that exchange.

BTC-e operates an order book. Sellers add Sell orders with an Ask price which they are happy to sell at (This is called a Limit order) Buyers places Buy orders with a buy (or bid) price they are willing to pay.

The difference between the two prices is called a spread.

So if you place a Limit Buy order, but it is below the lowest Sell order then your order gets placed in the order book. If it was higher than the highest order, already in the order book, then the quoted Bid price will increase to the price you Bid at. Now if later someone else places a sell order at or below your bid price, then the order book will match your order and it will become a trade. (and vice versa).

When this happens. your orders are taken off the order book* and the next lower Buy order and next higher Sell order will become the new Bid and Ask prices.

Now if you want to make a Buy (or Sell) Trade right now: You can place a Market order which you say you want to Buy (or Sell) X number of coins (or shares on a stock market) i.e., you don't give a price. When you do that, the BTC-e order book software will match the lowest sell limit order (or highest buy order when you are selling) and create a trade right away.

Which is the right order type to place, that depend on your trading strategy and is a whole other topic.

The rate quoted is normally the last price that a pair of orders that was matched at.

*It is slightly more complex than that, because you have partial fills, but you get the idea.

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  • So the rate or price is the last trade? It seems that sometime the price matches the lowest Ask and/or the highest bid. Is this skewed because of partial fills?
    – user6972
    Dec 17, 2013 at 5:45
  • Yes partial fills (or another Buy/Ask order at that price) or someone later adds an order at that last price (but there is still a spread to the other side of the trade)
    – DarcyThomas
    Dec 18, 2013 at 4:24
  • FYI a fill is Your one order completes as several matching trades. As people wanting to buy sell exactly the same amount at a matching price is rather rare.
    – DarcyThomas
    Dec 18, 2013 at 4:28

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