"Use Limit Orders"

kmiklas

kmiklas

A few months back, after some research, I stopped using limit orders. As a Computer Programmer, I am well aware of how easily algos can be run to manipulate a price against standing limit orders (think 0+ algos and their relatives). That's a game that I can't win.

I can't change the algos run at the exchanges, but I can change my trading style. Specifically, I now use market orders for everything. No limits, no stops... no indication whatsoever is given until it travels from my mind to a market order. I am now holding my hand very close to my chest.

Forthwith, check out this email that showed up in my inbox.

Now that I'm clear on what a Market order is, I guess that I'd better start using limit orders, wouldn't you agree?

Dear Trader,

We noticed that you have recently submitted Market Orders in your account(s) *******. Please see important information below regarding this order type.
  • Please note that a Market Order is an instruction to trade your order at any price available in the market, subject to any additional instructions for handling/simulating the particular order type you specified and other order conditions you specify when submitting your order. A Market Order is not guaranteed a specific trade price and may trade at an undesirable price. If you would like greater control over the trade prices you receive, please submit your order using a Limit Order, which is an instruction to place your order at or better than the specified limit price, or submit an algorithmic Market Order (IBALGO).
  • In accordance with our obligations as a broker, large Market Orders may be split into smaller orders, which will be traded over time. This is designed to reduce the impact of these large orders on the market, including the impact your order has on the market price.
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Just doing their part to remind you that market orders open you up to market rape depending on the security. If the stock you are trading is liquid then your limit order for 100 shares is not going to set the algos on fire to try and scalp you. Limit orders are the way to go if you want to be filled at a specific price, market orders outside of extremely liquid securities are the way to go if you like giving away money.
 
optioncoach said:
Just doing their part to remind you that market orders open you up to market rape depending on the security. If the stock you are trading is liquid then your limit order for 100 shares is not going to set the algos on fire to try and scalp you. Limit orders are the way to go if you want to be filled at a specific price, market orders outside of extremely liquid securities are the way to go if you like giving away money.
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there is a flip side in that coin

when market is moving fast, especially on breakouts and reversals, and one needs to get in (or out) extremely quickly, with limit orders he will not be filled...

he will be watching how market is going away while he sits on his unfilled order....that's when one will really gives away money :)

solution: trade liquid markets with cross-market orders
 
Deuteronomy_24_7 said:
For retail-sized orders, a good practical compromise is a (buy/sell) limit at the (offer/bid) price, on a 1¢-wide stock.
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..only to helplessly watch as the price hovers one penny away from your limit order, rockets in the other direction, and the opportunity is missed. ;)

If I want to get in, long or short, I buy in. If I want out, I get out.
 
optioncoach said:
Just doing their part to remind you that market orders open you up to market rape depending on the security. If the stock you are trading is liquid then your limit order for 100 shares is not going to set the algos on fire to try and scalp you. Limit orders are the way to go if you want to be filled at a specific price, market orders outside of extremely liquid securities are the way to go if you like giving away money.
More...

How about stop limits to enter? Any time I have gotten reminders like that I think is complete opposite ways, as reminder we want you to add to shares or contracts so you can show the world your intentions. I don't trust brokers, they right up there with most vendors. But to trade you have many sharks in the business.
 
Another option is a discretionary order where you are say $1 off the market but will hit anything instantly up to a limit price.
 
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