Market vs. Limit Orders

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indeterminancy
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Market vs. Limit Orders

Post by indeterminancy »

When regularly purchasing ETFs in a taxable investment account, and assuming a DCA strategy, do you initiate market or limit orders? Why?
nix4me
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Re: Market vs. Limit Orders

Post by nix4me »

I use Market orders since the bid/ask spread on index funds is very small. If the market is really volatile then I occasionally use limit order. I avoid opening and closing hour and try to trade about noon time. If it’s obvious to me that the market is headed down all day, I sometimes set a limit order lower than NAV or I wait until about 3PM.
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Re: Market vs. Limit Orders

Post by livesoft »

I use market orders most of the time, but sometimes I use limit orders.

A good reason to use a limit order is when you have $504.12 and what you want to buy is trading near $50.40 a share. One can buy 10 shares at $50.41, but not at $50.42, so using a limit order of $50.41 is a good idea.

A good reason to use market orders is for ETFs with one cent bid/ask spreads is just to get it over with. You have a very good idea of what you will pay.

If you posted a ticker symbol and a dollar amount, then I can tell you exactly what I would do. :)
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indeterminancy
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Re: Market vs. Limit Orders

Post by indeterminancy »

Thank you both.

Oh, I'm referring to funds like VTI, VXUS. I understand the bid/ask isn't that significant. I don't like having unresolved transactions but have also tried squeezing additional value through limit orders, which may be a form of market timing? I'm just not sure these types of limit orders are worth it.
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Re: Market vs. Limit Orders

Post by livesoft »

For VTI or VXUS, I would just use a market order unless a situation for a limit order came up like I noted before.

Another limit order example for VTI: I have $1459.11 to invest, but VTI is trading at $146.23. I would put in a limit order at $145.91 to buy 10 shares. I might change it after an hour or so to a market order for 9 shares, then a limit order for 1 share with whatever money I could scrape up.

One might ask, "Why do you have such an oddball amount?" The answer is simple: I just got almost that amount from a dividend that was paid, so add the dividend to the $2.31 already in the Roth and I get $1459.11.
Last edited by livesoft on Mon May 11, 2020 10:17 am, edited 1 time in total.
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Re: Market vs. Limit Orders

Post by Vanguard Fan 1367 »

I like market orders because I am sure that the order will happen quickly. I have tried limit orders and they sometimes didn't work out the way that I had hoped.

I am in the market for the long term so I like to get in when I am buying. If I want to sell something I generally want to get the job done.
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Re: Market vs. Limit Orders

Post by vineviz »

indeterminancy wrote: Mon May 11, 2020 9:15 am Thank you both.

Oh, I'm referring to funds like VTI, VXUS. I understand the bid/ask isn't that significant. I don't like having unresolved transactions but have also tried squeezing additional value through limit orders, which may be a form of market timing? I'm just not sure these types of limit orders are worth it.
They almost certainly are not worth it. A market order will get you the best price and immediate execution.
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Re: Market vs. Limit Orders

Post by nisiprius »

At one point, after the infamous flash crash of 2010, all the ETF mavens said that everyone should always be using limit orders. As it happened, I wanted to make one of my (rare) ETF purchases. It was actually a purchase of the iShares AGG ETF at Fidelity. Well, all I can say is that I was never able to get a limit order to execute, and none of the ETF mavens has ever been able to tell me why. I started by asking placing one midway between bid and asked. I called a Fidelity rep and he said midway between bid and asked should work and even suggested a number, so I tried again and failed again. Then I tried placing them at the exact "asked" amount. When that didn't work, I tried to go slightly above the ask and found that the Fidelity website literally would not let me place an order above the displayed "ask" price. I tried again at the "ask" price and failed again.

So I shrugged and placed a market order, which got filled at almost exactly the displayed "market" price.

Maybe the problem is that I wasn't buying a 100-share round lot, I have no idea. All I know is that I wasn't able to buy an ETF successfully using a limit order.
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Re: Market vs. Limit Orders

Post by glock19 »

Hypothetical and unlikely question: you are placing an order for an ETF that's trading for around $50 per share. You place a market order at $50. All of a sudden the only ask offer available for a trade is $60. Will your order execute at $60?
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Re: Market vs. Limit Orders

Post by retired@50 »

It's stories like the ones above that make me glad I use mutual funds. :D

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vineviz
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Re: Market vs. Limit Orders

Post by vineviz »

glock19 wrote: Mon May 11, 2020 10:47 am Hypothetical and unlikely question: you are placing an order for an ETF that's trading for around $50 per share. You place a market order at $50. All of a sudden the only ask offer available for a trade is $60. Will your order execute at $60?
Not unless the value of the underlying assets makes an instantaneous jump of 20%.

In other words,"no".
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Re: Market vs. Limit Orders

Post by livesoft »

retired@50 wrote: Mon May 11, 2020 10:48 am It's stories like the ones above that make me glad I use mutual funds. :D
But you have no chance to benefit from a flash crash. So during the infamous flash crash of 2010, I bought shares at about 10% below the morning price and the closing price. That is, I gained 10% in under an hour.
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Re: Market vs. Limit Orders

Post by crefwatch »

indeterminancy wrote: Mon May 11, 2020 9:15 am Oh, I'm referring to funds like VTI, VXUS. I understand the bid/ask isn't that significant. I don't like having unresolved transactions but have also tried squeezing additional value through limit orders, which may be a form of market timing? I'm just not sure these types of limit orders are worth it.
Very significant additional information. I agree that there is no reason to use limit orders for ETFs that have daily volumes of six figures and more! There are small ETFs where a limit order can make sense. I'll offer the examples BSCR and XCEM. I'd also pay attention to whether a smaller ETF has a spread between trading price and NAV. Naturally, how much you want to own the product, and whether you are willing to end up with none (or an odd lot) of it.
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Re: Market vs. Limit Orders

Post by DetroitRick »

I use both frequently, but I use limit orders more. Both for stocks and etfs's.

Things that to one degree or another push me toward limit orders
size of transaction (materiality)
rare conditions of significant market volatility (as I define it - unusual bid/asks spreads, bizarre and rapid price movements)
very stale prices
confidence in particular price and a patience to wait for it (as in rare times when I have somewhere to be and don't want to watch the market or execute a trade while out).

When the opposite is true, I use market orders. Plus when I'm tax loss harvesting, I seldom care.

Both are simple and quick. As is changing the limit price if situations change. With the specific positions I am likely to trade, it seldom makes much difference. On the other hand, it's simple protection against those rare extreme market movements.
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Re: Market vs. Limit Orders

Post by retired@50 »

livesoft wrote: Mon May 11, 2020 10:54 am
retired@50 wrote: Mon May 11, 2020 10:48 am It's stories like the ones above that make me glad I use mutual funds. :D
But you have no chance to benefit from a flash crash. So during the infamous flash crash of 2010, I bought shares at about 10% below the morning price and the closing price. That is, I gained 10% in under an hour.
I suppose that's true, but since I'm retired, I rarely purchase more stock funds anyway. I would only purchase during dividend season, assuming I don't direct the dividends to my money market fund for spending needs.

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Re: Market vs. Limit Orders

Post by livesoft »

I am retired and I purchase equities whenever I have to rebalance into equities. And that's despite taking withdrawals from the portfolio.
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Re: Market vs. Limit Orders

Post by Jack FFR1846 »

A limit order protects you. If I want to buy an ETF that's currently $50 +/-, I'll put in a limit order for $50 or $50.1 or even $51. If for some reason, we get a jump to $55, then back down to $50, I won't buy in during that jump up. It costs nothing to use a limit. If I put in $51 and market is $50, my broker will buy at $50. It cost me nothing.
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Re: Market vs. Limit Orders

Post by stan1 »

Jack FFR1846 wrote: Mon May 11, 2020 11:58 am A limit order protects you. If I want to buy an ETF that's currently $50 +/-, I'll put in a limit order for $50 or $50.1 or even $51. If for some reason, we get a jump to $55, then back down to $50, I won't buy in during that jump up. It costs nothing to use a limit. If I put in $51 and market is $50, my broker will buy at $50. It cost me nothing.
I have done this, too. I only have a little observational data but I believe I get better execution with a market order (usually closer to bid) than with an above ask limit order (usually closer to ask).

I'm not sure if this is real or imagined though, maybe others have better data on this.
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Re: Market vs. Limit Orders

Post by Ben Mathew »

Open limit orders leave you exposed to better informed market participants who will pick off your order when they learn new information. Generally speaking, open limit orders should only be used by professional market makers--never by individual (or even institutional) investors.

Market orders are generally fine, but there is a very small risk of getting caught in a flash crash when the market is not working properly. This can be addressed by:

(1) Spreading out your trade over time. That is, trade in smaller batches, keeping in mind any additional transaction costs of doing so.

(2) Use limit orders with a limit price set well clear of current prices so the order will be filled except in the event of a flash crash.
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Re: Market vs. Limit Orders

Post by jco »

Jack FFR1846 wrote: Mon May 11, 2020 11:58 am A limit order protects you. If I want to buy an ETF that's currently $50 +/-, I'll put in a limit order for $50 or $50.1 or even $51. If for some reason, we get a jump to $55, then back down to $50, I won't buy in during that jump up. It costs nothing to use a limit. If I put in $51 and market is $50, my broker will buy at $50. It cost me nothing.
This is the right advice. If you want to buy at market price just set the limit order to a dollar more than its currently trading. You'll buy the ETF instantly (assuming the price hasn't jumped, which is unlikely for high volume ETFs). However, if there was a "flash" increase it will protect you from getting burned. This is a very rare occurrence, but it has happened.
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Re: Market vs. Limit Orders

Post by occambogle »

Ben Mathew wrote: Mon May 11, 2020 12:27 pm Open limit orders leave you exposed to better informed market participants who will pick off your order when they learn new information. Generally speaking, open limit orders should only be used by professional market makers--never by individual (or even institutional) investors.
Could you explain further please?
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Re: Market vs. Limit Orders

Post by rockstar »

I always submit limit orders. I want to know what I'm paying.
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Re: Market vs. Limit Orders

Post by Ben Mathew »

occambogle wrote: Mon May 11, 2020 2:59 pm
Ben Mathew wrote: Mon May 11, 2020 12:27 pm Open limit orders leave you exposed to better informed market participants who will pick off your order when they learn new information. Generally speaking, open limit orders should only be used by professional market makers--never by individual (or even institutional) investors.
Could you explain further please?
Sure. Suppose the price of a stock is $100, and you place a limit order to buy at $95. It doesn't fill and remains open. If good news about the stock comes in and the price increases to $110, your order goes unfilled--no gain or loss to you. If bad news comes in and the price drops to $90, your order is filled. A better informed market participant sold to you at $95 when they knew the price was really $90 and you didn't. These better informed market participants are market making professionals, which I believe are now mostly high frequency trading algorithms equipped with superfast data feeds, co-located servers, and so on (i.e. there is no chance that you will become aware of news faster than they will.)

Market makers make money on the bid ask spread and have to invest in the infrastructure to get news first. There is no point in trying to outguess them. Just take the offered $100 by placing a market order (or a limit order at say $105 to protect in the unlikely event of a market malfunction).

By placing a limit order below the market price, you are ensuring that the best case scenario is that your order doesn't fill and you lose nothing, and the worst case scenario is that your order does fill and you lose something.
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Re: Market vs. Limit Orders

Post by DetroitRick »

Limit orders are fine for the average investor. There is visibility to limit orders of course, which all of us can see when using trading platforms. But limit orders are entered and cancelled with a head-spinning frequency anyway throughout the trading day. They are less of a clue to real price movements than you might think, and far less than they used to be. Many are entered and cancelled quickly. If HFTs are using my limit order to front-run me, good luck. Of course, this depends on the specifics of what you are doing in terms of volume and frequency. For little old me, limit orders are usually a smart choice (albeit most often not necessary).
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Re: Market vs. Limit Orders

Post by whodidntante »

nisiprius wrote: Mon May 11, 2020 10:35 am At one point, after the infamous flash crash of 2010, all the ETF mavens said that everyone should always be using limit orders. As it happened, I wanted to make one of my (rare) ETF purchases. It was actually a purchase of the iShares AGG ETF at Fidelity. Well, all I can say is that I was never able to get a limit order to execute, and none of the ETF mavens has ever been able to tell me why. I started by asking placing one midway between bid and asked. I called a Fidelity rep and he said midway between bid and asked should work and even suggested a number, so I tried again and failed again. Then I tried placing them at the exact "asked" amount. When that didn't work, I tried to go slightly above the ask and found that the Fidelity website literally would not let me place an order above the displayed "ask" price. I tried again at the "ask" price and failed again.

So I shrugged and placed a market order, which got filled at almost exactly the displayed "market" price.

Maybe the problem is that I wasn't buying a 100-share round lot, I have no idea. All I know is that I wasn't able to buy an ETF successfully using a limit order.
I had similar issues trading ISCF at Merrill Edge, which I blame on some deficiency of Merrill Edge. I have reasonable guesses as to why the orders would not execute, but I do not and cannot know.
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Re: Market vs. Limit Orders

Post by smartinvestor2020 »

I always use buy limit orders below the bid ask spread and sell limit orders above the spread. That way, I will almost always beat a market order and lose nothing to the spread. The key is setting the limit price very close to the spread so that the order will almost always execute.
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Re: Market vs. Limit Orders

Post by typical.investor »

indeterminancy wrote: Mon May 11, 2020 8:17 am When regularly purchasing ETFs in a taxable investment account, and assuming a DCA strategy, do you initiate market or limit orders? Why?
I use Marketable Limit Orders

Sell to the bid and buy from the ask

Leave a little room for market fluctuation

You get immediate execution at the market price and protection against exchange error and sudden price fluctuation from non-liquidity
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Re: Market vs. Limit Orders

Post by Ron Ronnerson »

I typically use limit orders in case a weird fluctuation occurs right as I'm placing the order.
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Re: Market vs. Limit Orders

Post by Rosencrantz1 »

I had always used market orders - until a few months ago. I was looking to add some Apple to our portfolio and watched the price over a few hours. It seemed to be hovering around (at the time) $255/share. I set a limit order at $250/share (thinking it might not execute). I was surprised later in the day when my order for 50 shares executed for $246.62/share. I don't remember what Apple closed at that day - but, it closed lower than I paid for it. Still... I was happy because I could have paid ~255.

Personally, I wouldn't use a 'limit' order on buying an ETF or mutual fund. But, my experience with an individual stock showed me there is potential to, perhaps, save a few bucks (given that I'd decided to buy the stock and had figured a price I was willing to pay).

My problem with limit orders is that there's some risk the trade will not execute. For me, usually once I've decided to buy/sell something, I want it to happen. That 'instant' transaction is one of the reasons I like ETFs better than mutual funds.

edit to add: the above transaction description happened in my Fidelity account (if that makes any difference)
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Re: Market vs. Limit Orders

Post by nisiprius »

crefwatch wrote: Mon May 11, 2020 11:00 amI agree that there is no reason to use limit orders for ETFs that have daily volumes of six figures and more!
VTI was among the ETFs affected by the 2010 flash crash. That's the thing that motivated me to try a limit order.

Ten shocking ETF charts from the Flash Crash
9. Vanguard Total Stock Market ETF (VTI)

It wasn’t just iShares ETFs that sunk on Thursday; this This mid cap ETF also lost more than 99% of its value on Thursday, bottoming out at 13 cents during the market glitch.

Thursday Open: $59.46
Thursday Low: $0.15
Thursday Close: $57.71
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Re: Market vs. Limit Orders

Post by corp_sharecropper »

I wonder how many "always use limit orders" people have been doing so based on 15-20min delayed quotes. Even real-time, but not streaming (aka your quote is already stale while you entered ticker, buy/sell, limit, # of shares, selected which account, and possibly margin/cash) will mean that your perceived brilliance of using a limit order +/- a few cents away/within the spread you're looking at on your screen is likely irrelevant.
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Re: Market vs. Limit Orders

Post by livesoft »

^For my brokers when one is entering an order, the real-time current bid/ask prices are shown before submit or confirm, so one shouldn't be looking at delayed quotes.

But I have a broker that shows me the real-time order book as well. As I noted above if I am trying to shoehorn a buy into a fixed amount of money, then I don't care what the quote actually is.
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Re: Market vs. Limit Orders

Post by vineviz »

smartinvestor2020 wrote: Mon May 11, 2020 4:42 pm I always use buy limit orders below the bid ask spread and sell limit orders above the spread. That way, I will almost always beat a market order and lose nothing to the spread. The key is setting the limit price very close to the spread so that the order will almost always execute.
Two things:

1) you always pay the spread on an ETF trade. Waiting/hoping for the price to move down or up so that a non-marketable limit order executes just means you pay the spread at the new price.

2) market structure in ETFs means that a non-marketable limit order usually gets a poorer execution than a market order or marketable limit order. There is no way to "beat a market order" in virtually any circumstance.
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Re: Market vs. Limit Orders

Post by corp_sharecropper »

livesoft wrote: Mon May 11, 2020 6:23 pm ^For my brokers when one is entering an order, the real-time current bid/ask prices are shown before submit or confirm, so one shouldn't be looking at delayed quotes.

But I have a broker that shows me the real-time order book as well. As I noted above if I am trying to shoehorn a buy into a fixed amount of money, then I don't care what the quote actually is.
Ok, maybe not applicable to you. But let's say one (anyone, a hypothetical person) gets to their 1-click order confirmation screen with the new quote on it, if their limit price is no longer as "strategic" as the order composition, then what? How many times do they back out of the order confirmation screen to adjust their limit only to find it is yet again stale before giving up? I'd venture to guess most people don't have live, up to the second quotes (such as to avoid a "flash crash" of or even just a dreadful few cents "less" than they think they deserve, as has been mentioned as the reason/insistence for using limit orders).
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Re: Market vs. Limit Orders

Post by smartinvestor2020 »

vineviz wrote: Mon May 11, 2020 7:31 pm
smartinvestor2020 wrote: Mon May 11, 2020 4:42 pm I always use buy limit orders below the bid ask spread and sell limit orders above the spread. That way, I will almost always beat a market order and lose nothing to the spread. The key is setting the limit price very close to the spread so that the order will almost always execute.
Two things:

1) you always pay the spread on an ETF trade. Waiting/hoping for the price to move down or up so that a non-marketable limit order executes just means you pay the spread at the new price.

2) market structure in ETFs means that a non-marketable limit order usually gets a poorer execution than a market order or marketable limit order. There is no way to "beat a market order" in virtually any circumstance.
0) I don't understand why highly liquid ETFs that I normally trade on known exchanges would be considered a "non-marketable" security. What is a "non-marketable" limit order?

1) I understand what you are saying about the spread, but you didn't understand what I'm effectively saying. Yes you always pay a spread at the time of execution. But my point is that you effectively got a better price than if you just bought using a market order at the time you place an ETF limit order.

2) You can "beat a market order" at time X, the same time you place an ETF buy limit order, if the ETF buy limit order executes at time Y at a lower price below the bid ask spread at time X. I am not saying that you can "beat a market order" at the same time that the ETF limit order executes.
Last edited by smartinvestor2020 on Mon May 11, 2020 10:37 pm, edited 2 times in total.
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Re: Market vs. Limit Orders

Post by BH+ »

I use marketable limit orders and always get filled at a good price (limit or better). I doubt using a market order would improve on that.
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Re: Market vs. Limit Orders

Post by livesoft »

vineviz wrote: Mon May 11, 2020 7:31 pm1) you always pay the spread on an ETF trade.
Except when you don't. I have sold shares at one broker to myself at another broker. I posted about it many years ago. No spread, but I did have to pay the SEC fee.

Also at the opening cross, there is no spread, so buyers and sellers get the same price.
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Re: Market vs. Limit Orders

Post by aj76er »

typical.investor wrote: Mon May 11, 2020 5:17 pm
indeterminancy wrote: Mon May 11, 2020 8:17 am When regularly purchasing ETFs in a taxable investment account, and assuming a DCA strategy, do you initiate market or limit orders? Why?
I use Marketable Limit Orders

Sell to the bid and buy from the ask

Leave a little room for market fluctuation

You get immediate execution at the market price and protection against exchange error and sudden price fluctuation from non-liquidity
+1

Marketable limit orders are what I use. I read somewhere that the exchange has to honor the transaction if you cross the spread to sell to the bid or buy from the ask. So it give you good execution and protection at the same time.

Before placing and order, I usually spend 10 seconds or so refreshing the order screen to see the number of buyers and sellers. It give me a crude sense of the impending direction of the price. I use this to anticipate my order and try to place it when there is somewhat of an equilibrium (between buyers and sellers).
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Re: Market vs. Limit Orders

Post by smartinvestor2020 »

aj76er wrote: Mon May 11, 2020 10:15 pm
typical.investor wrote: Mon May 11, 2020 5:17 pm
indeterminancy wrote: Mon May 11, 2020 8:17 am When regularly purchasing ETFs in a taxable investment account, and assuming a DCA strategy, do you initiate market or limit orders? Why?
I use Marketable Limit Orders

Sell to the bid and buy from the ask

Leave a little room for market fluctuation

You get immediate execution at the market price and protection against exchange error and sudden price fluctuation from non-liquidity
+1

Marketable limit orders are what I use. I read somewhere that the exchange has to honor the transaction if you cross the spread to sell to the bid or buy from the ask. So it give you good execution and protection at the same time.

Before placing and order, I usually spend 10 seconds or so refreshing the order screen to see the number of buyers and sellers. It give me a crude sense of the impending direction of the price. I use this to anticipate my order and try to place it when there is somewhat of an equilibrium (between buyers and sellers).
I have a couple dumb questions. What is the difference between marketable and non-marketable limit orders? I thought nearly all ETFs trade on an exchange which makes them marketable. I've never seen the option to choose between marketable and non-marketable limit orders through any brokerage I've used, so how do I know if the limit order is marketable or non-marketable? How do you get immediate execution with marketable limit orders?
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Re: Market vs. Limit Orders

Post by Patzer »

indeterminancy wrote: Mon May 11, 2020 8:17 am When regularly purchasing ETFs in a taxable investment account, and assuming a DCA strategy, do you initiate market or limit orders? Why?
I use market orders for anything under $250 (reinvesting a dividend, etc.).
Anything in the $250-1000 range and I put in a limit at the bid, and it usually executes pretty fast.
Anything over 1K and I work the limit order a little bit more. Back in January that might have been shaving a few pennies off. Lately, it's been closer to half a percent.
typical.investor
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Re: Market vs. Limit Orders

Post by typical.investor »

smartinvestor2020 wrote: Mon May 11, 2020 10:26 pm I have a couple dumb questions. What is the difference between marketable and non-marketable limit orders? I thought nearly all ETFs trade on an exchange which makes them marketable. I've never seen the option to choose between marketable and non-marketable limit orders through any brokerage I've used, so how do I know if the limit order is marketable or non-marketable? How do you get immediate execution with marketable limit orders?
It's not a dumb question.

Example of Marketable Limit Orders

Bid $29.94
Ask $29.96

Sell to the bid and buy from the ask
Leave a little room for market fluctuation

To sell, set the limit at around $29.90 (i.e. a little lower than the bid)
To buy, set the limit at around $30.00 (i.e. a little higher than the ask)

Those are "marketable" because there is someone now who will sell at that price or buy at that price. It's not 100% guaranteed that by the time you place the order that they will still be there, but markets generally aren't that volatile, and these orders will generally execute immediately.

Your broker will get the best price available to you at the moment your order is placed assuming it's within your limit. If for some reason the market moved unexpectedly (flash crash or just movement on news) and the order didn't execute, you can evaluate the situation and immediately replace it.
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Stef
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Re: Market vs. Limit Orders

Post by Stef »

So it's just a limit buy order above the current ask price?
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Re: Market vs. Limit Orders

Post by typical.investor »

Stef wrote: Tue May 12, 2020 1:39 am So it's just a limit buy order above the current ask price?
Yeah or a sell with a limit below the current bid
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Re: Market vs. Limit Orders

Post by Stef »

That's how I do it every month. VTI at 147.49$? I place a limit order at 147.60$. Never had any issue.

But I guess doing market orders wouldn't change anything, at least if we are talking about buying 10-20 shares of VTI.
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Re: Market vs. Limit Orders

Post by occambogle »

Thanks for taking the time to explain....
Ben Mathew wrote: Mon May 11, 2020 4:26 pm Sure. Suppose the price of a stock is $100, and you place a limit order to buy at $95. It doesn't fill and remains open. If good news about the stock comes in and the price increases to $110, your order goes unfilled--no gain or loss to you. If bad news comes in and the price drops to $90, your order is filled. A better informed market participant sold to you at $95 when they knew the true price was really $90 and you didn't.
Fair enough. But if you had placed a market order when the price was $100, you would have had it filled at $100. So while a better-informed market participant eventually sold to you at $95, you are still better off.

I guess a lot of this comes down to whether you are willing/able to monitor in real-time, the whole time. And while I get your point that you can't fight the algos etc, I'm thinking more of a situation when you think the market may fall, and you are using limit orders to DCA without the human element. I have regrets about "waiting, waiting...." in March when the market fell. I was looking to buy NTSX which started at $31 and went as low as $23. Now it's back up to $29 and while I bought some at $24... I missed a lot of opportunity. Market timing fail? Yes, mostly. In retrospect I feel it would have been better to take out the human element by placing GTC limit orders at 5% bands all the way down to say -40%... and just have let it rolled. Do you think there's a better strategy (I'm talking purely in terms of how orders are placed of course)?
Last edited by occambogle on Tue May 12, 2020 5:52 am, edited 1 time in total.
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Re: Market vs. Limit Orders

Post by nisiprius »

typical.investor wrote: Mon May 11, 2020 11:08 pm...To sell, set the limit at around $29.90 (i.e. a little lower than the bid)
To buy, set the limit at around $30.00 (i.e. a little higher than the ask)...
Stef wrote: Tue May 12, 2020 1:39 am So it's just a limit buy order above the current ask price?
When I tried to do exactly that at Fidelity, the online system would not allow me to do it. My recollection is that I entered an amount, say $45.67, that was slightly above the asking price, clicked "place order," and it popped up a message saying something curt like "error, $45.67 exceeds asking price." This was years ago and I didn't get a screenshot (and I don't have a Fidelity account any more), but if I recall correctly, do I infer that Fidelity's brokerage wasn't up to standard and was imposing a restriction that brokerages generally do not impose?
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Re: Market vs. Limit Orders

Post by nps »

Ben Mathew wrote: Mon May 11, 2020 4:26 pm
occambogle wrote: Mon May 11, 2020 2:59 pm
Ben Mathew wrote: Mon May 11, 2020 12:27 pm Open limit orders leave you exposed to better informed market participants who will pick off your order when they learn new information. Generally speaking, open limit orders should only be used by professional market makers--never by individual (or even institutional) investors.
Could you explain further please?
Sure. Suppose the price of a stock is $100, and you place a limit order to buy at $95. It doesn't fill and remains open. If good news about the stock comes in and the price increases to $110, your order goes unfilled--no gain or loss to you. If bad news comes in and the price drops to $90, your order is filled. A better informed market participant sold to you at $95 when they knew the price was really $90 and you didn't.
In your example, you would buy at $100 for a market order. And you buy at $95 for the open limit order, which you are saying shouldn't be used. And that is somehow worse?
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Re: Market vs. Limit Orders

Post by typical.investor »

nisiprius wrote: Tue May 12, 2020 5:26 am
typical.investor wrote: Mon May 11, 2020 11:08 pm...To sell, set the limit at around $29.90 (i.e. a little lower than the bid)
To buy, set the limit at around $30.00 (i.e. a little higher than the ask)...
Stef wrote: Tue May 12, 2020 1:39 am So it's just a limit buy order above the current ask price?
When I tried to do exactly that at Fidelity, the online system would not allow me to do it. My recollection is that I entered an amount, say $45.67, that was slightly above the asking price, clicked "place order," and it popped up a message saying something curt like "error, $45.67 exceeds asking price."
I'm sure that was just a Fidelity error. Likely they meant to simply give you notification of the event as brokerages do.
nisiprius wrote: Tue May 12, 2020 5:26 am This was years ago and I didn't get a screenshot (and I don't have a Fidelity account any more), but if I recall correctly, do I infer that Fidelity's brokerage wasn't up to standard and was imposing a restriction that brokerages generally do not impose?
Try it again. I bet it will work.
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Re: Market vs. Limit Orders

Post by Rudedog »

I use limit orders, but, if I really want the stock, set the price a few cents higher than current market price to be sure a small fluctuation doesn't shut me out. I used limit orders several weeks back to try to buy some UPS stock when it was below $ 90, but I couldn't get it done, the market never went that low. I try to always trade between about an hour or 30 minutes before market close.
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Re: Market vs. Limit Orders

Post by SethJane42 »

Deleted--I was wrong
Last edited by SethJane42 on Mon Jun 08, 2020 7:00 am, edited 1 time in total.
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