Tuesday, December 14, 2010

How to Trade


One thing to get used to when trading contracts in open market conditions is the role of the Bid-Ask spread. So when the market-maker states "I am 163 eight five up" this means he will buy or go long in size of upto 5 lots (£ per point) at a level of 163. The MM also states that he will sell or go short in size of upto 5 lots at a level of 168 - the big numbers of 16 are not repeated.

When the IB trade they "hit the bid" to sell at 163 (MM therefore buys at 163) and "lifts the offer" to buy at 168 (MM therefore sells at 168)

Suppose DK is the MM and PH is the IB and PH sells at 163 in 5 lots. Two tickets are therefore created by each counterparty. They look like the image to the side:-

No comments:

Post a Comment