Market order vs "Marketable" limit order

[Trader_Herry]

In the cases where you prefer execution over price, what orders do you prefer and why:
- market order
- "marketable" limit order (ie for a buy, send at a price at or above best ask)

Just list the conditions/situations or state your cases if your answer is "it all depends".

Thank you.

 

[Don Bright]

Quote from Trader_Herry:

In the cases where you prefer execution over price, what orders do you prefer and why:
- market order
- "marketable" limit order (ie for a buy, send at a price at or above best ask)

Just list the conditions/situations or state your cases if your answer is "it all depends".

Thank you.

We teach our traders to use limit orders because market orders are sometimes held and batched by the Specialists, thus taking extra time. If the offer is 40.05, we enter a buy order at 40.09 or something similar...then the clerk can simply accept the order, giving us the best possible price....

Don

 

[t1ck3r]

Market orders directed to NYSE specialist take longer to process than a marketable limit order This is not an issue for ECN's that accept market orders. As NYSE gets more and more automated in its matching process this difference will become null.

 

[Don Bright]

Quote from t1ck3r:

Market orders directed to NYSE specialist take longer to process than a marketable limit order This is not an issue for ECN's that accept market orders. As NYSE gets more and more automated in its matching process this difference will become null.

I agree, but I don't like the idea of market orders being turned to limit orders based on current bid/offer either...we'll have to see how it pans out.

(BTW, are you Greg?...judging by the handle)

Don

 

[qazmax]

Quote from Trader_Herry:

In the cases where you prefer execution over price, what orders do you prefer and why:
- market order
- "marketable" limit order (ie for a buy, send at a price at or above best ask)

Just list the conditions/situations or state your cases if your answer is "it all depends".

Thank you.

"It all depends..."

Seperating execution from price is analgous to seperating take-off from landing in an aircraft.

That said, it comes down to psychology a lot of the time. Control or no control.

IMO...
It is easier for most people to live with missing an execution than it is getting a terrible price. I know P/L may say it depends on the math. I am just suggesting that most traders blow a fuse over a bad price more so than a missed execution. I believe it is because they can blame another person for the bad fill, but they can only blame themselves for the missed execution. (Note: Some traders blame others for everything).

 

[Trader_Herry]

Quote from t1ck3r:

Market orders directed to NYSE specialist take longer to process than a marketable limit order This is not an issue for ECN's that accept market orders. As NYSE gets more and more automated in its matching process this difference will become null.

Another issue we need to consider is the price. Assuming the processing problem does not exist, which orders will tend to get better price fills?

 

[Don Bright]

Quote from Trader_Herry:

Another issue we need to consider is the price. Assuming the processing problem does not exist, which orders will tend to get better price fills?

You may find this of interest. http://www.stocktrading.com/PricevsSpeed.htm

There are changes taking place in October that will affect how we place orders, and again in February with the Rule NMS (I'll have written an artcile by then that I'll post up).

Don

 

[t1ck3r]

In reference to NYSE if the book gets frozen a limit order priced through the market (marketable) and a market order will get the same price. The limit order priced through will get a price improvement. BUT that will / is changing ! The book will be frozen less often and limit orders priced through the market will sweep to each price level until completed. So in that case you will be better off with a market order that will protect you to the best bid / ask. Now better off is relative...if you believe the stock is going to take off or your strategy is trying to catch momentum you will want to just get into the position not to miss the move.

 

[cashmoney69]

Because of my style of trading I dont care about slippage, so I use market orders about 80% of the time.

 

[Trader_Herry]

Don Bright,

a broker came in and simply said, “Seventy for 40,000 Xyz” — a 70-cent bid for 40,000 shares of a large-capitalization stock. Bill said “Done,” and then glanced at his assistant, who promptly filled all the booked sell orders up to the 0.70 transaction price (a few thousand shares received a few cents’ price improvement up to the 0.70 trade from their existing offers at lower prices). Bill filled the balance of the 40,000 shares himself. He did not buy from the book and then sell to this broker at 0.70. Instead, he merely participated on the sell side, thus accommodating the order.

The specialist fill the shares himself.
What does it imply?
Should I (not) fill by market orders?