Limit orders and market orders

Runner1 said: "I'm a newbie to stock market, so maybe you guys could help me. Can you tell me from your experience in what cases you use a limit order and in what a market one? Appreciate any help."

crankitdb711 said: "[QUOTE=Runner1]I'm a newbie to stock market, so maybe you guys could help me. Can you tell me from your experience in what cases you use a limit order and in what a market one? Appreciate any help.[/QUOTE] I always use limit orders... even if the limits are far from the price I am willing to buy or sell it. Would you go on ebay and say "I'll buy that item for whatever you guys think is the fair price for it?""

thezster said: "Market order???????? What's a market order?????? :th_coolio:"

thezster said: "On the more serious side... I rarely, rarely put in a market order as I've seen the price of the buy/sell be affected by my actions when I do so - causing me to either pay too much - or get too little... Probably 99.8% of my orders are strictly limit orders. I will use a market once in a while if I feel my equities are going to drop out of sight quickly - and simply want out of a position..... or - conversely - when I've made a pretty good profit on something and want to clear out instantly (E-Trade guarantees a less than 2 second execution)."

LongArm said: "I normally use market orders only. My style of trading dictates that I get in quickly and out quickly (although my trades typically last anywhere from an hour to a couple days). I can't afford to miss out on the buy--and certainly not the sell--so limit orders just wouldn't work for me. Also, since I often don't enter a trade until I see confirmation that the trade is moving in my favor (a novel concept on this board, I think), limit orders wouldn't work for me anyway. Sure, occassionally I don't get the best price, but when I don't, it's usually only by a couple of cents or so. A much less expensive alternative for me than missing the trade altogether. Having said that, limit orders make sense for many kinds of trading. It's mainly for those who believe that "XYZ is a good buy at $xx.xx, and I would like to buy at that price or better," believing that they'll be rewarded sooner or later for picking up a "bargain." I personally believe it's dangerous buying something on the way down, but that's just my opinion, my philosophy."

thezster said: "Which is why God invented chocolate AND vanilla.... different things work for different people and their styles.... You have to figure out what works for your particular style..... then stick with it..."

Runner1 said: "Thanks for your answers guys. So correct me if I wrong: you use limit order when you could afford to wait some time, but to get a better price, and the market order when you can afford higher (lower) price, but to do it immediately. There is however one more thing that really perplexes me here. As I understand, any bargain is stroked when there are two counter best-price orders in which the selling price is equal or less than the buying price. Now I presume that the significant part of bargains is stroked on the basis of two counter LIMIT orders. But this means that in every bargain there is a person who sees the counter offer and in fact agrees to its conditions by putting a limit order with the same (or better) price. First, is this really the case? Second, if it is, why wouldn’t he simply place a market order?"

Cryogenix said: "Provided you have an enter and exit strategy, and that your stock is moving in the desired direction, limit orders are great. When there's heavy trading or very light trading, I've seen sudden up/down spikes in the range of $.50. If you get caught in a stall/pause at the top of a spike (say at $23.00) and you place a market order to sell, that $23 could drop to $22.50 in an instant, and that's what you'd get. Conversely, if you're trying to buy at $23 and place a market order to buy, then it shoots up to $23.50 (and it might just come back down suddenly again...happens a lot) then you've now paid $.50 more per share than you intended to. I only use market orders like Z does, to get out fast on a sudden step decline. You can always get back into the position at a lower price. The only time I haven't used limit orders was during a buying frenzy, when I'd keep buying and selling as it surged up and down... The pace is far too fast to place a limit order. You can usually get within about .03-.05 of what you want, though."

LongArm said: "[QUOTE=Cryogenix]Conversely, if you're trying to buy at $23 and place a market order to buy, then it shoots up to $23.50 (and it might just come back down suddenly again...happens a lot) then you've now paid $.50 more per share than you intended to.[/QUOTE] This has only happened to me once--an outrageous fluke fill that was nowhere near the current bid/ask. I simply called Scottrade and they quickly fixed it for me, no problem."

thezster said: "[QUOTE=LongArm]This has only happened to me once--an outrageous fluke fill that was nowhere near the current bid/ask. I simply called Scottrade and they quickly fixed it for me, no problem.[/QUOTE] Can't argue with L.A.... If I put in a market order - on those rare occasions.... I pretty much get what I want... but sometimes it is up to a nickel more/less than I wanted....which, to me,,,,,,, is "HUGE".... The problem that comes up for you is the time lag between entering your order and it getting processed.... in those seconds - or fractions of seconds - the price can move up or down.... Additionally, if your order is submitted, for instance, when the bid is 200/$50.00..... - and those 200 shares move before your order hits... the next bid in line might well be only $49.95 - which is what you'll get nailed with.... With thinly traded shares - that difference can be exaggerated greatly - giving you much less of a deal than you bargained for...... In essence... with high volume equities... a market order doesn't make a whole lot of difference.... in low volume equities... a market order can literally kill you....."

LongArm said: "[QUOTE=thezster]...in low volume equities... a market order can literally kill you.....[/QUOTE] That's a very good point. If I was trading low volume equities, I would probably be using limit orders, depending on HOW low volume they were and how desperate I was to execute the order. 'Course, if I was trading low-volume equities, I'd need to find a new strategy too, because the one I'm using now would be difficult at best."

Rbreb13 said: "I almost always use limit orders. Market orders have a place but its very rarely I find I'm in that place. I'm beginning to trade Zster style. I have a few stocks that I've watched and played a few times and am getting to know them now. I swing trade my plays though. I have also started a covered call strategy for my long terms. I still use limit orders though because I know what price I'm willing to pay and if I don't get the price I want I take my ball and go home!"