Quote from mmm:
Davo,
A rule of thumb for you:
Take entry via lmiit orders so you don't eat the spread.
Exit when your stops are hit at the market. Better to eat the spread here than have a larger loss.
- M
P.S. A second rule of thumb for you: There are no rules, but only guidelines. You need to know when to follow the rules, and when to break them. That will come with experience.
This is great. Very simple but very true. May I extend that further, with personal opinion?
1. Don't use market orders at all. I would not take one if my life depended on it.
In the moment you enter at market, not only do you probably give up an edge, but you give your naked body to the market. It can do anything to you. Don't be fooled by liquidity. You can get filled
anywhere.
Example: Just 3 days ago, I entered the DAX long at a limit order. Seconds later, it went to the moon, did 30 points in less than a minute, in fact only several seconds. I'm not sure if you know what 30 points on DAX is, it's about 750 Euro - for every contract.
What if I had entered at market? I could have been filled 30 seconds later, at the absolute top, and been destroyed. It goes both ways. This was just another occassion to amplify why I don't use market orders for entry. As you get to trade, you will have plenty of those - don't worry.
2. Same as mmm said: Never use stop-limit orders or stuff like that to get out. This is the complete opposite to entry, so it's easy.
If you want to get out based on a fixed stop, then you want to get out - quick! You get out at a stop-market. Market is your only choice. Hit whoever is willing to deal next. Don't play with your exits. Just exit. Quick.
As for myself, there's a caveat here: I am a scalper, so I will generally both enter and exit on limit orders. However, the latter is one of the things that make scalping comparatively difficult. So don't even contemplate it until you've mastered longer-term trading.
Warmest Regards,
Scientist
