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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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure:

Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

 

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