Limit, Stop, and Market Orders

[kmiklas]

I've Googled around, but there's a lot of conflicting information out there, so I come to you, here at Elite Trader, for The Truth.

As I understand it, for U.S. equities:

Market Order. Executes at the best available price standing on the book.
Example: Bid/Ask for MSFT stands at $60.42/$60.43. Market buy order entered, BOT at $60.43.

Stop order. Becomes a market order when the specified price is reached
Example: +200 on MSFT, stop sell set at $60.10. Downspike. Bid breaches 60.10, stop becomes a market order. By the time that this market order is first in line, the bid/ask is at $59.83/$59.86. SLD at $59.83.

Limit order. Does not become a market order when price is breached.
Example: MSFT stands at $59.83/$59.84. Limit buy set at $59.42. Downspike to $59.31/$59.32........................

What happens here? If the price downspikes through the limit buy, and there are not enough orders on the book to fill it at the specified price, is it discarded, or filled at a lower price?

Along the same lines, what's the best way to get a specific price on an equity?

Thx, Keith =^)

 

[Metamega]

The limit order will be executed at the best price. I always use what most would call a marketable limit order, meaning my limit is above the best offer. Just a habit because I don't want to be that bad tick on the chart on some fancy footwork from algos.

For stops I use a limit stop. Consists of a trigger price and a limit. My limit is usually quite low in case of a fast market but still don't want to be on the other end of what happened last august. If the market drops 10 percent on open I got to assess my positions.

 

[CyJackX]

I've Googled around, but there's a lot of conflicting information out there, so I come to you, here at Elite Trader, for The Truth.

As I understand it, for U.S. equities:

Market Order. Executes at the best available price standing on the book.
Example: Bid/Ask for MSFT stands at $60.42/$60.43. Market buy order entered, BOT at $60.43.

Stop order. Becomes a market order when the specified price is reached
Example: +200 on MSFT, stop sell set at $60.10. Downspike. Bid breaches 60.10, stop becomes a market order. By the time that this market order is first in line, the bid/ask is at $59.83/$59.86. SLD at $59.83.

Limit order. Does not become a market order when price is breached.
Example: MSFT stands at $59.83/$59.84. Limit buy set at $59.42. Downspike to $59.31/$59.32........................

What happens here? If the price downspikes through the limit buy, and there are not enough orders on the book to fill it at the specified price, is it discarded, or filled at a lower price?

Along the same lines, what's the best way to get a specific price on an equity?

Thx, Keith =^)

Huh? Is this a limit order or a stop limit?

If it were a standing limit order during the day, it'd be hit along the way, filling at the limit price, since the price has to go thru it to spike thru it.

If it were a stop limit, you could get a better price from the slippage that happens between it being triggered and sent to the exchange.

If it's at the open, then you'll buy at the best ask below your limit.

 

[Overnight]

A limit order is not executed at a "best price". A limit order will only be executed at that price, period.

Here is the simplest way to think of it.

A stop is a "pending execution".

If you have a stop market order, when price reaches your stop, a market order is sent to the exchange. Fill should be immediate.

If you have a stop limit order, when price reaches your stop, a limit order is generated and sent to the exchange, for the price that was the stop. Whether it gets filled or not depends on the market's dynamics. Remember...A limit order is a guaranteed price but not fill, and a market order is a guaranteed fill but not price.

So basically, a stop order is a way to have an "order triggered" when you are away. Stops are just a way for you to tell the broker to do something on a semi-automated level.

 

[Overnight]

One other comment...I do not know how it is with equities, related to your questions kmiklas...Seems to me the best choice for a stop loss would be a stop market order. If you have a stop limit order in for a protective stop, you might not get filled on a sudden loss, and wind up holding a loser far more than you wish. If your trade is losing and you want out with a protective stop loss order, it seems to make sense to do it with a stop market. It may get you out with some extra negative tics, but at least it won't be as bad as if your stop loss was a limit that never gets filled.

 

[Metamega]

Let me rephrase what I said. A stop limit order will execute at the best price available.

It becomes a marketable limit order, however if it gaps past the limit it's left standing in the book.

 

[Buy1Sell2]

I've Googled around, but there's a lot of conflicting information out there, so I come to you, here at Elite Trader, for The Truth.

As I understand it, for U.S. equities:

Market Order. Executes at the best available price standing on the book.
Example: Bid/Ask for MSFT stands at $60.42/$60.43. Market buy order entered, BOT at $60.43.

Stop order. Becomes a market order when the specified price is reached
Example: +200 on MSFT, stop sell set at $60.10. Downspike. Bid breaches 60.10, stop becomes a market order. By the time that this market order is first in line, the bid/ask is at $59.83/$59.86. SLD at $59.83.

Limit order. Does not become a market order when price is breached.
Example: MSFT stands at $59.83/$59.84. Limit buy set at $59.42. Downspike to $59.31/$59.32........................

What happens here? If the price downspikes through the limit buy, and there are not enough orders on the book to fill it at the specified price, is it discarded, or filled at a lower price?

Along the same lines, what's the best way to get a specific price on an equity?

Thx, Keith =^)

Limit means "or better"

 

[Overnight]

Limit means "or better"

Yes, that's a better way to phrase it. A limit order is executed at the limit price "or better". It can't go worse. But then again, if price suddenly goes very worse quickly, it may not be filled, whereas a market order would.

 

[Phoenix137]

Hi, I'm a newbie in stock trading. I tried to goggle my question but I couldn't find the answer. Can you use stop limit order to exit your position? Thank you.

 

[Bobby Jay]

It is important to realize that stop-loss orders do not guarantee you'll make money in the stock market; you still have to make intelligent investment decisions. If you don't, you'll lose just as much money as you would without a stop loss, only at a much slower rate.