Daytraders: Limit Order Vs. Market Order

Many of the new breed of order entry front-ends (eg: Bracket Trader, Button Trader, Ninja Trader etc) solve this dilema by offering a "chase" facility. The front-end generates a limit order to join the bid when buying, for example, and will chase it for a specified number of ticks. The ROI on this technology is very compelling.

bolter
 
Limit order ALWAYS. I trade AHC mostly and go through the offer 6 cents and normally get price improvement. When I want to get out quick, I'll go through 25 cents. Only in VERY rare instances will I ever go Market. Frankly, I think it's just stupid.
 
i don't know if we are having semantic differences here, but just for clarity,

by limit order i mean buying below the offer, or selling above the bid

anything else is market.
 
Quote from doublea:

This thread is designed so that we can discuss our entry via limit order or market order.

I used to use market orders for all my entries and exits but my risk per trade was a big number and I held the positions overnight. Now I have developed a daytrading system to trade the ES and I have been screwed by using market orders.

I would like to get a discussion going on in this subject. Please share your preferances and and experiences and please let us know what you're trading. It might be different for stocks vs. futures.

I will share my preferences and experiences if other people are interested.
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interesting.

i trades es now and then when opportunity presents itself (quite rare).

i saw using limit orders as a way to nudge the r:r if i got in a tick better with a limit.

i would wait for my stop price to trade, then id put my limit in for a tick better noticing that es tends to rotate around prices more than other stuff i trade.

however i found i would only get filled on 60% of the trades. often, price would just go straight through. if it did retrace, it was only for a tick (my price) and i wouldnt always get a fill.

i realised that the extra ticks i was gaining from the use of the limit did not cover/exceed the lost opportunity/ticks had i used an entry stop.

are you getting slippage in es? if you are retail rates, you shouldnt have any slippage with market stops.
 
The strength of the move can be gauged by the slippage in the instrument. Sort of a poor man's "order imbalance."

That said if your limit got filled at the battle line often times you already lost depending on your timeframe, especially if you've got size in the queue.

The answer is almost always "it depends" at all times in all walks of life.
 
Quote from FredBloggs:

interesting.

i trades es now and then when opportunity presents itself (quite rare).

i saw using limit orders as a way to nudge the r:r if i got in a tick better with a limit.

i would wait for my stop price to trade, then id put my limit in for a tick better noticing that es tends to rotate around prices more than other stuff i trade.

however i found i would only get filled on 60% of the trades. often, price would just go straight through. if it did retrace, it was only for a tick (my price) and i wouldnt always get a fill.

i realised that the extra ticks i was gaining from the use of the limit did not cover/exceed the lost opportunity/ticks had i used an entry stop.

are you getting slippage in es? if you are retail rates, you shouldnt have any slippage with market stops.
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Re the xtra vs the loss of opportunity ... did you take into account the opportunity to bet twice as heavily if your risk was halved by your better entry (also the greater range to your target)?
 
Quote from whitster:

i don't know if we are having semantic differences here, but just for clarity,

by limit order i mean buying below the offer, or selling above the bid

anything else is market.
More...

Ok - well then you don't know what a Limit Order is...

Limit Order = "I want to buy or sell this thing up to (or down to) this price, but not above (below) it."

Market Order = "Get me into or out of this thing at any price."

Limit Orders benefit from price improvement just like Market Orders do.

If the market is moving and you want to get in, then you can put in a limit order for X cents above the offer and hopefully get price improvement. If you went Market in the same scenario, you have no idea where you're getting filled (probably at the top).

Since the specialist fills orders based on Time, Price, Size (in that order), going Market is suboptimal in almost every situation unless you are late to the trigger (Time being the first consideration of the specialist) - in which case you might as well wait for the next opportunity anyway.
 
Quote from FaderTrader:

Ok - well then you don't know what a Limit Order is...

Limit Order = "I want to buy or sell this thing up to (or down to) this price, but not above (below) it."

Market Order = "Get me into or out of this thing at any price."

Limit Orders benefit from price improvement just like Market Orders do.

If the market is moving and you want to get in, then you can put in a limit order for X cents above the offer and hopefully get price improvement. If you went Market in the same scenario, you have no idea where you're getting filled (probably at the top).

Since the specialist fills orders based on Time, Price, Size (in that order), going Market is suboptimal in almost every situation unless you are late to the trigger (Time being the first consideration of the specialist) - in which case you might as well wait for the next opportunity anyway.
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This is a good analysis.

One makes money 2 ways...
(1) By trading "mispriced" securities... however you determine this.
(2) Having the bid/ask spread in your favor... just like the Specialist.

Maybe your spread is so small... $0.01 or whatever that it's not a big deal...
But my NYSE spreads are often $0.05 to $0.15...
So the spread gives me about 50% of my profits.

If one uses market or stop orders...
One completely forgoes the profits from #2.
In fact, one PAYS the Specialist or dealer #2... however big or small it might be.

Also, people can and will play games with you market or stop order...
It's a total "license to steal" for the Specialist or dealer...
But he is smart enough to steal only 10% of the time.

For stocks this is black and white...
Always limit orders...
Unless you absolutely must do something in a big hurry.

rm+

:cool: :cool: :cool:
 
Quote from FaderTrader:

Ok - well then you don't know what a Limit Order is...

Limit Order = "I want to buy or sell this thing up to (or down to) this price, but not above (below) it."

Market Order = "Get me into or out of this thing at any price."

Limit Orders benefit from price improvement just like Market Orders do.

If the market is moving and you want to get in, then you can put in a limit order for X cents above the offer and hopefully get price improvement. If you went Market in the same scenario, you have no idea where you're getting filled (probably at the top).

Since the specialist fills orders based on Time, Price, Size (in that order), going Market is suboptimal in almost every situation unless you are late to the trigger (Time being the first consideration of the specialist) - in which case you might as well wait for the next opportunity anyway.
More...

Good explanation, but let me add that the NYSE "assistants" can fill limit orders immediately by clicking a button, often with price improvement.

Only Specialists themselves can "match" or "batch" market orders, and therefore some time may pass waiting for him to execute (30 seconds or so)....so if you "have to get out" I suggest the above, place buy orders above the offer, and vice-versa with sell orders.

Don
 
Based on everything that was recently posted here. It looks like limit orders are the way to go for stocks. However, the futures are a different story. It all depends what is more important to ones strategy. Definitely being in the trade via market order or getting a little better price with limit order at the expense of missing the trade.

Really good posts everyone. Thanks a lot.

redduke
 
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