When to use limit or market orders?

Learning to correctly use limit and market orders is difficult aspect of trading, and one where we do not claim to be an expert on this matter. However, on thinking about this subject, the following may be a guide:

Prefer limits when...

  1. You have many trade opportunities and the profit potential is small. Why rush to market when there are more opportunities?
  2. The conditions for getting filled at limit are good.
  3. On entries, confidence in market moving immediately in favor is lower and on exits confidence of market moving in your favor is high
  4. You are price sensitive -- because you are uncertain or there is no need to go to market.
  5. Typically on pull backs

Prefer market orders when...

  1. The opportunity is very significant in relation to the spread.
  2. The conditions for getting filled at limit are poor.
  3. Confidence is higher.
  4. Information is more time sensitive then price sensitive.
  5. Typically on break outs


Wednesday, June 07, 2017 9:09:00 PM


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