When you are investing you are either buying or selling a stock or a virtual currency (in the case of The SwissBorg App). In order to connect buyers and sellers more efficiently we developed The Smart Engine who act as a broker.
Multiple types of orders exist: limit orders, stop orders and the most important one - the market order.
An order to buy or sell immediately at the current market price, it is executed almost immediately, regardless of price. Market orders do not guarantee a price, but they do guarantee the order's immediate execution, they are popular among individual investors who want to buy or sell a stock without delay.
Typically, if you are going to buy at market you will pay the lowest (best) asking price and then move up the orderbook until your size is filled.
For example of market orders:
- if you want to buy 6 shares, your execution price will be 100
- If you want to sell 8 shares, you execution price will 97.75 (=(4*99+1*98+3*96)/8)
If you place an order that is too big compared to the current trading volume, it will have a market impact, because of a change in the market price. Buying an asset will drive its price up while selling an asset will do the opposite. The extent to which the price moves is a reflection of the liquidity of the asset: the more liquid the asset, the less any one trade will affect its price.
If we assume the market price (execution price of the last trade) is 99 and you want to buy 32 shares at the market. You start to buy 9 at 100, +5 at 102+, 1 at 105+ and so on until you have bought the 32 shares, your last purchase will be 1 at 120. Following your order the new market price will be 120 (up by 20%) and your average execution price will be 106.91. This effect works equally on the upside and the downside.
Our trading algorithms are designed to optimise your execution price as we are buying/selling one several exchanges at the same time. For example, a large trade can be broken into a series of smaller trades. But if you place a large order it will still have a market impact. In order to limit the market impact to the minimum and protect you from a disappointing execution price we have set to trading limit which are the following:
CHSB ~USD 2’500 (equivalent)
ETH ~USD 10’000 (equivalent)
BTC ~USD 10’000 (equivalent)
These limits will be regularly reviewed and adapted based on the market conditions.