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

Comments

Comments are closed on this post.

 

NOTICE: "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. Past performance, whether actual or indicated by simulated historical tests of strategies, is not necessarily indicative of future results. All results should be treated as hypothetical on this website. No trades should be viewed as recommendations or signals. Our software is designed to enable traders to make own decisions. All decisions are your own.