Chapter 1 · How the market actually works
How your order gets matched
Nobody sells you a share. You are matched against another ordinary person who wanted the opposite of what you wanted.
When you buy a share, NEPSE does not sell it to you. Another investor somewhere sold it, and the exchange matched the two of you. Every single trade has a person on the other side who looked at the same price and reached the opposite conclusion.
Sitting with that fact is worth more than most technical indicators. If you are certain a share is cheap at Rs 500, someone equally informed just sold it to you at Rs 500.
What is the order book?
NEPSE keeps a list of every unfilled order for each stock: buyers on one side with the price they will pay, sellers on the other with the price they will accept. This is the order book, and your trading screen shows part of it as market depth.
The highest a buyer will pay is the bid. The lowest a seller will accept is the ask. While the bid is below the ask, nothing trades. When someone crosses that gap — a buyer willing to pay the ask, or a seller willing to take the bid — a trade happens and a new price prints.
How do price priority and time priority work?
Orders are matched in a fixed order. Better prices go first: the buyer offering more gets filled before the buyer offering less. Among orders at the same price, the one entered earlier goes first.
What are market orders and limit orders?
- A limit order names your price. You will not pay more than you said — but you may not get filled at all.
- A market order takes whatever price is available now. You will almost certainly get filled — at a price you did not choose.
For most people in most situations, a limit order is the right default. A market order in a thinly traded stock can fill far away from the price you saw, because it walks up the order book until it finds enough shares.
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