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Thread: Limit orders best?

  1. #1
    God/dess NinaDaisy's Avatar
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    Default Limit orders best?

    While most of my money is managed by a professional, I also have my own Etrade brokerage account.

    I was told that buying "Limit" is better than the "Market" option, which seems to be the default one.

    What are the differences between Market, Limit, Stop and Stop Limit?
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  2. #2
    Sitri
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    Default Re: Limit orders best?

    You can google all of the definitions. But, yes I always use a limit order. A stock will change a lot during the day and if you put in a limit order you won't buy it at the high. A market order basically says, "Please screw me without kissing me".

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    Default Re: Limit orders best?

    http://en.wikipedia.org/wiki/Order_%28exchange%29

    A limit order essentially gives you the option of naming your price. Yes, you gain the potential of picking up a stock at a lower price (or selling it at a higher price) than current market prices.

    Of course, like any investment tool, there is a risk in using limit orders. If you place a limit order at a certain price and the market price of that stock goes in the opposite direction, the order may never get executed. On the other hand, if the market price goes your direction, reaches your limit, and executes your order, it could very well just keep on going past it, and you'll wished you'd have set your limit even farther out.

    Whether to use one is really a matter of your investing style. Personally, I don't want to sit fixated to my computer all day watching a stock price fluctuate, so I'd give the limit order a thumbs up, although some brokerages will charge more for them versus a market order.
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    Default Re: Limit orders best?

    I typically enter trailing stop (a.k.a. downside limit % automatic sell) orders which are set at a price 10-20% below the current short term average price of the shares (depending on expected volatility of that particular stock). In this way, if something should suddenly happen that causes the stock price to 'fall out of bed', my shares will be sold automatically before the price falls in the extreme, thus (hopefully) limiting my downside exposure.

    However, be aware that certain 'big players' are not above 'manipulating' the price of certain stocks in the short term by heavy short selling ... for the express purpose of driving down the share price enough to trigger the automatic stop-loss orders which other stock share owners have in place... where the additional sales due to the execution of other stock share owners' automatic stop-loss orders drives the share price even lower ... at which point the 'big players' quickly buy back in to cover their short sales and pocket a hefty profit !

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