Market Order or Limit Order

[HowardCohodas]

Quote from LEAPup:

Imo, there should be more threads like this at ET.

Start them!

 

[VoodooMMI]

Quote from WinstonTJ:

Don't EVER use market orders. Use limit only - if you want to get into a stock just "pay through" on your price.

Example:

Stock ABC, Bid = $10.00, Ask = $10.01

if you want to buy, send a limit order for $10.26
if you want to sell, send a limit order for $9.75

You will be given an instant fill plus price improvement.

Actually the fills in this instance depend on how many shares the buyer wants to buy and how many shares are offered at each level. For example, if the buyer want to Buy 10,000 shares with limit of $10.26 or better and the following stock is offered:
1000 at $10.01
2000 at $10.05
1000 at $10.10
3000 at $10.17
400 at $10.20
600 at $10.26
1000 at $10.30, the buyer will receive the following fills
bought 1000 at $10.01
bought 2000 at $10.05
bought 1000 at $10.10
bought 3000 at $10.17
bought 400 at $10.20
bought 600 at $10.26 for a total of 8000 shares bought and the buyer will be bidding $10.26 for the remaining 2000 shares. So after the the order has been entered and the partial fills executed, the new quote for the stock will be
$10.26 to $10.30 20x10. Which means the highest bid is our buyer who is trying to buy 2000 shares at $10.26 and the lowest offer is the seller that is trying to sell 1000 shares at $10.30

 

[LEAPup]

Quote from HowardCohodas:

Start them!

You know, I think I will start a few. We all talk about highly technical, and fundamental stuff, etc., but there's something to say for the "bread and butter" threads.

 

[traderharley]

Quote from VoodooMMI:

the following stock is offered:
1000 at $10.01
2000 at $10.05
1000 at $10.10
3000 at $10.17
400 at $10.20
600 at $10.26

Hello VoodooMMI,

The is stock is offered as in your list, suppose you send a limit order $10.26 for 500 shares, would this broker can only fill your order from the offer at $10.01, or they may fill your order at $10.17? Because $10.17 still meets your limit order requirement. Thank you VoodooMMI.

 

[VoodooMMI]

Quote from traderharley:

Quote from VoodooMMI:

the following stock is offered:
1000 at $10.01
2000 at $10.05
1000 at $10.10
3000 at $10.17
400 at $10.20
600 at $10.26

Hello VoodooMMI,

The is stock is offered as in your list, suppose you send a limit order $10.26 for 500 shares, would this broker can only fill your order from the offer at $10.01, or they may fill your order at $10.17? Because $10.17 still meets your limit order requirement. Thank you VoodooMMI.

The broker is supposed to follow a vaguely defined term of "best execution" for your order. But this mandate applies to the whole of the orders that they execute and any one order (yours) may have some strange-looking fills but the BD would still be within best execution guidelines. With that stock offered, an order to buy 500 at $10.26 or better will be filled at $10.01 99% of the time. If this is a slow moving stock, I'd prefer to enter an order of Buy 500 at $10.01 and wait a few seconds to see what comes back in the way of fills or does the $10.01 offer disappear and I'm best bid bidding $10.01 for 500 little shares. If that's the case, then the offer was most likely not a firm offer but rather smoke and mirrors. If this stock is a high-priced or fast moving stock like GOOG, then maybe you would want to place your limit 25 cents more than the current ask price. Once again there is no answer that will be correct 100% of the time. It also depends where the stock trades. From a retail perspective, orders for stocks that trade on the NYSE or Nasdaq behave similarly. OTC and Pink Sheet stock orders are handled differently to favor the market makers more (i.e. limit orders between the bid and ask do not have to be displayed)