Consider some exchange, e.g. Mt. Gox, with just two users, Alice and Bob. If Alice places a sale order limited above 90$, and Bob places a buy order limited below 110$, at what rate will the exchange take place?
1 Answer
It depends on who posts the order first.
If Alice posts first a sell
at 90, then Bob posts a buy
at 110, Bob will buy
from Alice at 90, and any excess will be posted as a buy
at 110 (if he wanted to buy more than Alice sold).
If Bob posted first a buy
at 110, then Alice posted a sell
at 90, the opposite would happen: Alice would sell
to Bob at 110, and any excess would be posted as a sell
at 90 (if she wanted to sell more than Bob wanted to buy).
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@stanga there are plenty of resources explaining limit orders, but they don't address it exactly your question, since they take it for granted. Wasn't able to find you one, sorry.– o0'.Apr 2, 2013 at 13:52