Limit or Market Orders

Quote from vegasoul:

using a limit order is trading against the trend..

you are bound to miss all the big winner that make your year

and you are bound to get slammed by the big loser that never

come back...
More...

This is big! I'll have to contact Morgan Stanley, Merrill Lynch etc. and thell them they have been wrong all along. I wonder how they have been able to survive so long without using market orders.

That big loser that never comes back has haunted me for years, too! It started out as a daytrade, but then it went against me and I just kept holding it. At that time, I didn't know how to sell yet. I have since learned how to sell other stocks, but I still can't sell that one big loser that has annihilated all other profits that I ever made. Why couldn't you have told me what you know a few years earlier? Then I would never have bought this loser using a limit order. I would have bought at the market and it would have turned into a homerun. Now I'm stuck in this losing position and can't get out, no matter how hard I try, all because I used a limit order to enter...
 
Quote from vegasoul:

using a limit order is trading against the trend..

you are bound to miss all the big winner that make your year

and you are bound to get slammed by the big loser that never

come back...

If you use a limit order....

you might save a few tick of slippage...

but you might a miss 30 point move...

the risk/ reward is all wrong (for my way of trading)

and

trading is not like shopping in a supermarket..

looking for a bargain is not always the best thing to do
More...


So if the market has upticked for the last 20 prints and is now 20.20 X 20.35 and I use a limit order to buy at 20.40

I'm now going against the trend? how so?


If I have a limit order to buy at 20.20 or below than yes I'd be counter trend........but if I place a limit to buy above the offer but only by a certain amount I am saying I'll pay the spread and am willing to only pay so much............

than I am going with the trend.

There are times though I want/need in badly and definitely go market
 
My observation tells me that certain times/situations market order is better. My problem is that when I should use market order, I'm still using limit order.
 
Quote from vegasoul:

using a limit order is trading against the trend..

you are bound to miss all the big winner that make your year

and you are bound to get slammed by the big loser that never

come back...

If you use a limit order....

you might save a few tick of slippage...

but you might a miss 30 point move...

the risk/ reward is all wrong (for my way of trading)

and

trading is not like shopping in a supermarket..

looking for a bargain is not always the best thing to do
More...
I agree, but I also disagree. There are definetly times for a market order. However, for almost all types of nonviolent moves, lifting the offer or whacking the bid with limit orders is fine. When you REALLY need to get into a trade, a limit price a dime or so thru the price level of the bid/ask acts as a kind of "market" order without any of it's disadavantages.

No question about it tho, there are times when a market order is the last chance to get on/out of the train...

nitro
 
I like to use limit order to enter, if miss the train it is ok. There are always other stocks to trade.

Market order is good to exit the position, otherwise I get stuck there.

The above preference are for liquid stocks or small spread.
 
Which order is faster? Limit or market? Not better, faster. Say the limit is placed way way ahead, it's a Nasdaq stock trading good volume and the order is in 100 share lots. One thing I know is that Island does not accept market orders. Does IB convert these to limit for Island during smart routing?

************************************************

If confusion is the first step to knowledge, I must be a genius.
Larry Leissner
 
In an electronic environment, all market orders need to be converted to some limit. Thus speed should be the same. However, on some exchanges - e.g. specialist, nasdaq pre-supersoes, firms selling order flow, most option exchanges, etc - orders may get into the hands of a human or a system that allows a delayed fill. IMO that gives a free option for the counterparty and thus you may be giving away a few ticks or the spread. As rharp states, a limit order does not have to equal the offer or bid.

I'd also like to ask for those that state you might miss the big 30 point move -- how many of those have you had? Ever consider that you might also get the flip side of the coin? What if you send in a market order to buy the fraction of a second after someone with a fat finger hits the buy key that knocks the market up 5% or an earnings warning is announced. Worrying about missing a home run is not the way to make a living. Overall it's the singles hitters who endure. I'd be more concerned about reducing slippage.
 
this is obviously very senstitive issue to traders..

I use both limit and market orders

and struggle with the problem everyday...

I am not saying using a limit order is just plain wrong..

otherwise it wouldn't exists...

the problem with a limit order is that

the losers are guarantee a fill and your winners are not

if you think of trading in terms of EDGES and probablitiy

the odds are already AGAINST you if you use a limit order..

let say you got theortical 50% winnersand no edge

whatsoever

In a 100 trades..you are GURANTEE to have 50 losers...

but there is no 100% certainty that you are going to 50 winners

you are going to miss some of them simply because it can

happen...even if it 's one or two of them...

may be it's a 1/1000 occurence...

but you still have negative expectation..



I try to make a living catching outliners, 4 , 5 standard deviation

winners and avioding outliner that go against me

My system have caught 39 winners in five years of

backtesting( and avoided a lot of big losers) out of 2000 trades

and they make up 120% of my profit...

so missing ONLY one will be truly devastating...

AND I have missed more than a few using a STOP LIMIT order...

and end up entering at much higher price..

A limit order might work wonders for some trader at merrich

lynch or scalpers ..whatever

I don't really gave a shit how they enters their order because I

don't work at ML or try to make a few ticks per trade

What I do nowadays is this:

I enter a a limit order and if I am not filled in 10-15 seconds or

the bid /offer keeps moving away from my order or it penertrates

another key level...I just buy /sell at the market...


 
With Nasdaq stocks and with electronic futures it is ridiculous NOT to use limit orders when entering an order. The limit is the current ask/offer when buying and the bid when selling. If you use a market order you are basically saying "please screw me". The only caveat is if you are trying to move larger size or get in/out at any cost.

With NYSE stocks and with pit traded futures, market orders may unfortunately be the the best way to be filled because of the delay the specialist and pit traders have when filling orders. All you can do is say please fill me at the best price and hope they aren't too greedy.

IMHO there are people who post on these boards who make part of their living taking advantage of people who place market orders in electronic markets - so be careful.
 
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