Monday, October 28, 2019

Limit Order vs. Market Order

        This post is a continuation of the $50 a month stock challenge I started October 14, 2019.  Click on, "No Commission Stock Trades", on the right side of the page to read from the start. 

     For now we will just be "BUY" or "SELL" orders. Pretty self-explanatory. Either order can be placed as "MARKET" orders or "LIMIT" orders.

     MARKET order are just what the name implies. Buy or sell at the market price.

    For you order, Market price is "NOT" the LAST traded price, but the NEXT traded price !
       Please the the "RED" statement AGAIN.

      The stock market is an auction and the same rules apply.
  This is an "after hours" chart and the price differences are larger but it REALLY explains
 what can happen using "MARKET ORDERS".

     You see the last price is $39.64 and think I will" buy" at that price but none are now selling at that price. The 1st sellers wants (ASK) $42.00 and a "market order" will pay $42.00, UNLESS by the time your "market order" gets routed, all those at $42.00 have been sold. NOW the next "ASK" is $46.00 and you will pay THAT!

     Own it but want to "sell" it. It works in reverse. You will not get $36.64 but $38.12 UNLESS the buyer has now purchased, then the next "buyer" is only willing to pay $36.00 and your "market order" will be filled because that is "the market".
     The ONLY good thing about a "marker order" is that it will be filled at "some" price.

     LIMIT BUY ORDER, with a "limit order" you dictate the price you want your order filled.
"Limit Buy Order" is the highest price you will pay for a stock (but you would pay less if any are available.
     LIMIT SELL ORDER, least about you will take ( but you would take more).

     GOOD, you name your price, BAD, that price might not be achieved.

     I only use "limit orders"!! Remember a "limit order" can be ANY price. You can put the price at "BID" or "ASK" if you want to. 

Disclaimer, I am not a professional.

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