Market or Limit Order?

[vikefan52]

I would just like to hear some opinions on this one. I know Phil Town talks about using market orders in his book. However, Jim Cramer says to always use limit orders. In his words, a market order is a " .... gilded, handwritten invitation to your stockbroker to rip you off. A market order lets your broker offer anything for a stock you're trying to buy or sell; it's easily conceivable that if you just say "buy", you could end up paying 1 or 2 percent above the asking price just because there's nobody looking out for you."

Also, since I work all day, and not home when the market opens or closes, how would I go about placing an order? I have not decided which broker to go with. I heard Scottrade costs $0.15 more for after-hours trades. However, here is a reply I received from a Scottrade Rep on this topic : "Cannot say that I have ever heard before that the price of extended hours has to be $0.15 greater then the close. You do run the risk of larger spreads between the bid and ask, but I never heard that the price has to be greater then $0.15 from the close." Any help on these topics is greatly appreciated. Thanks.

[Gunnski]

Take a look at ThinkorSwim. Open up a sample acct. & give it a whirl. You can paper trade (2) accts. for 100,00.00 each.The guys with to much testerone will tell you not to paper trade and jump right in with your real hard earned money. I recommended gaining some confidence, especially in the current choppy market conditions.

[npg]

There are pros and cons to limit orders. The big con is that your order may not be filled at all --which can happen more often that not.

The pro is that you don't get to pay more than the limit price. Indeed, this can be a few percentage points, but thats more down to fluctuations and your position in the order queue than anything else.

Generally, if a broker cheats you with a market order then you should take your business elsewhere. I have never heard of cases like this, although some people claim bad experiences.

Your mileage may vary.

[vikefan52]

Thanks for the information npg and Gunnski. I really appreciate it. I will take a look at ThinkorSwim. Any other tips or advice, feel free to share.

[Gunnski]

On the run so hope this makes sense.

Some people use a mental loss stop. Say if you buy a stock at $10.00 per share. You want a loss of no more than 7%. You'll make a mental note or a watch list note to sell if the stock does not catch on and drops to $9.29.

If you do not want to be glued to the comuputer, Blue Tooth etc. I like to use a Stop Limit order. On Scottrade, when I put in the order, I simply type in 7% and submit the stop limit order.

I also use a price point of the low, from the previous candle, (day prior of my buy), as my stop (sell point) point. This varies from a couple % to as much as 10%+. I have factored in the risk reward, so I must be comfortable with by stop.

If your not a day trader, I think you are crazy not to use a stop limit buy or sell order. If you select quailty businesses, you should not fear that big gap down. With the current market there are no guarentees! Always protect yourself. Remember when you buy a stock someone else just sold it. So one of you will be a loser!

Best of investing.

[vikefan52]

In reference to my initial post on this topic, how would I go about placing an order (buy/sell), since I am not around when the market opens or closes? Anyone else in this boat? I have a day job, but I am ready to take full control of my money. Thanks in advance to everyone.

[joshuat]

You can place your order at any time, it will be executed the next time the market opens. It will execute at market price, unless you specify a limit. If you have to trade this way, a limit makes sense, just in case there was some news between the time you ordered and the market opened. Just figure out the maximum you are willing to pay, and specify that amount. Say you are willing to buy BNI at up to $80, and it is trading at $75. Place an order at a limit of $80. If it is actually trading at 75.10, that's the price you will get it for, so there is no risk.