WHAT IS 'Significant Order'

A significant order is a trading order to buy or sell a security in which the trading order is so large that it may significantly affect the price of the security. While not illegal, significant orders are not seen as beneficial for the market, and investors generally try to cushion the market from orders that are too large.

BREAKING DOWN 'Significant Order'

A significant order is trading order that buys or sells a security, but a trading order that is so large that it may abnormally affect the price of the security. Investors generally prefer a less volatile market, so significant orders disrupt the normal trends of the market.

Most individual trades don't have any significant impact on the price of a security. However, volume of trades always affects the price of a security, with more buy orders raising the price and more sell orders lowering the price. A significant order is so large that it will trigger a huge increase, if it is a buy order, or a huge decrease, if it is a sell order. This is seen as negative because it penalizes long-term investors who are hoping for incremental growth, not sudden movements of the security price. Sudden decreases can also have negative effects that snowball and can crash the market, affecting not just the original security price but the prices of other securities, as well.

Placing Significant Orders

The majority of significant orders are placed by institutional investors. Institutional investors are traders who invest on behalf of large organizations and institutions, so they trade higher volumes than do individual investors. Because these institutional investors know that significant orders will affect share price so significantly and disturb the market, they often place these orders over several days or weeks to avoid having so much impact on the share price all at once.

It is possible to use significant orders to inflate or deflate share prices to profit from these changes. An example of this is in the foreign currency market, when a large sell order for one currency will deflate the price of that currency, so an investor could go in while the price was deflated and buy more shares at a low price. This is a form of currency manipulation. Although currency manipulation is usually conducted by countries themselves on a large scale, individuals can conduct small-scale manipulation with significant orders for profit. This is not considered ethical and investors who are caught doing this on purpose can be disciplined.

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