Marketable limit order buffer %/$

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Marketable limit order buffer %/$

Post by harikaried »

Today I placed a marketable limit order to buy VEU when it had a bid/ask $43.63/$43.64. The limit I set was $44 or better, and the purchase was made in 3 lots: 50% at $43.635, 10% at $43.637, and 40% at $43.639. I picked the limit by calculating roughly 1% higher than the current ask to be pretty sure the order would close without needing to refresh quotes and monitor if it executed or not.

Is there a general recommendation on how big of a buffer to Buy over ask or Sell under bid? Some percentage or dollar amount?
livesoft
Posts: 86079
Joined: Thu Mar 01, 2007 7:00 pm

Re: Marketable limit order buffer %/$

Post by livesoft »

I would have put the limit much close to the ask, say $43.64. 1% higher is a HUGE amount that I would not ever suggest.

I bought BND with market orders today. The spread was one cent at the time and I got half-way between bid/ask.

My feeling is that sometimes a limit order gets "hung up" by your broker so that your broker can take advantage of it. I feel that for under 100 shares or an amount of shares not divisible by 100 (so 100, 200, 300, … shares), a market order that gets past any delays built-in by your broker for odd lots and limit orders is sometimes better. Sometimes, I even break orders up. For instance: If I want to buy 248 shares, I will submit two orders: one for 200 shares and a separate one for 48 shares. Maybe it is just superstition on my part, but I am going by personal experience using at least 3 brokers.
Last edited by livesoft on Wed Sep 02, 2015 2:20 pm, edited 1 time in total.
Wiki This signature message sponsored by sscritic: Learn to fish.
User avatar
indexfundfan
Posts: 3962
Joined: Tue Feb 20, 2007 10:21 am
Contact:

Re: Marketable limit order buffer %/$

Post by indexfundfan »

The spread of VEU is very small. I don't see a need to go higher. If you really want to make sure it executes, just set it a few cents higher than the asking price.
Last edited by indexfundfan on Wed Sep 02, 2015 2:17 pm, edited 1 time in total.
My signature has been deleted.
User avatar
ResearchMed
Posts: 16795
Joined: Fri Dec 26, 2008 10:25 pm

Re: Marketable limit order buffer %/$

Post by ResearchMed »

harikaried wrote:Today I placed a marketable limit order to buy VEU when it had a bid/ask $43.63/$43.64. The limit I set was $44 or better, and the purchase was made in 3 lots: 50% at $43.635, 10% at $43.637, and 40% at $43.639. I picked the limit by calculating roughly 1% higher than the current ask to be pretty sure the order would close without needing to refresh quotes and monitor if it executed or not.

Is there a general recommendation on how big of a buffer to Buy over ask or Sell under bid? Some percentage or dollar amount?
I think your strategy of "just a bit" (assuming you didn't have any "rule") is fine.
It should be adjusted so it won't exceed what you are *willing* to pay.

As you've noticed, it often executes below the limit entered, so the real goal is to avoid paying too much in a blip.

RM
This signature is a placebo. You are in the control group.
livesoft
Posts: 86079
Joined: Thu Mar 01, 2007 7:00 pm

Re: Marketable limit order buffer %/$

Post by livesoft »

ResearchMed wrote:As you've noticed, it often executes below the limit entered, so the real goal is to avoid paying too much in a blip.

RM
For me, the goal is to never pay the posted ask price, but to pay less. Also, when selling my goal is always sell higher than the stated bid price. A secondary goal is to sell at the high price of the day or to buy at the low price of the day.
Wiki This signature message sponsored by sscritic: Learn to fish.
leonard
Posts: 5993
Joined: Wed Feb 21, 2007 10:56 am

Re: Marketable limit order buffer %/$

Post by leonard »

What does "marketable" mean in this context?
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
Coles
Posts: 119
Joined: Sat Sep 20, 2014 9:11 pm

Re: Marketable limit order buffer %/$

Post by Coles »

leonard wrote:What does "marketable" mean in this context?
https://personal.vanguard.com/pdf/ISGETF.pdf

Marketable limit order. A limit order whose limit price is set either at or above the best “offer/ask” when buying or
at or below the best bid when selling. This essentially accomplishes the same goal as a market order, but with some
price protection.
Post Reply