Prices Change in Steps, Not Continuously
Prices do not move smoothly or continuously.
They change only when a trade occurs, and only to the price of that trade.
If nobody offered or accepted a particular price, nothing happens at that price — even if it lies numerically between two others.
The market does not walk through prices.
It jumps between the prices at which trades occur.
Price changes occur only as discrete events not along a continuous path.
A Gap Exists Above the Best Ask
At this moment, the asks ledger contains two prices: $20 and $22
No ask is recorded at
$21
Because execution can occur only at prices written on resting orders, execution cannot occur at
$21
No trade occurs yet because the best bid is $16 which does not overlap the best ask of $20
Stage 1. A Buy Order Arrives That Can Reach Multiple Ask Prices
Event: At a buyer submits an order to buy 7 apples at $22
This buy order overlaps both existing ask prices:
- it can execute at $20 (because $20 ≤ $22 )
- and if quantity remains, it can execute at $22 (because $22 ≤ $22 )
Execution can proceed.
Stage 2. Execution Moves Directly From $20 to $22
Execution follows the established rules:
- better ask prices execute first (lowest ask price first)
- time priority applies only when prices are equal
Execution 1
5 apples are exchanged at $20
- A - the ask @ $20 is fully removed.
- B - the bid @ $22 is reduced from 7 to 2
- C - a trade is recorded at
The reported price is now $20
Execution 2
2 apples are exchanged at $22
- D - the $22 ask's amount is reduced from 4 to 2
- E - the bid @ $22 is fully executed and removed.
- F - a trade is recorded at
The reported price is now $22
What Did Not Occur
No execution occurred at $21
Execution moved directly from $20 to $22 because:
- no resting ask was recorded at $21
- execution steps occur only at prices of resting orders that are matched
A price value may appear as a limit on an order without ever becoming an execution price.
The matching process does not interpolate between prices.
It advances directly from one matched price level to the next available matched price level.
No trade record is created at a price unless an order at that price is actually matched.
Conclusion
Price changes are not required to move one numerical step at a time.
Execution can only occur at prices that exist in the book.
When an intermediate price is absent, it cannot appear in the trade tape, because no execution can occur there.
Price “gaps” are not special events.
They are ordinary outcomes produced by missing traversal levels in the book.