Secrets of Finances and Payday Loans

As mentioned above, the choice each trader faces between market orders and limit orders is influenced by his estimate of the probability of execution, which depends both on the depth of the book at the time of the order submission and on the number of orders that may arrive over the remainder of the day. All traders coming to the marketplace take this updating process into account and in equilibrium the traders’ behaviour generates systematic patterns in transaction prices and order placement strategies. The results from this model show that both sides of the book affect agents’ order placing strategies, and enable us to explain some of the well-known price patterns established, for instance, by Biais, Hillion and Spatt.