|
A buy limit order is usually placed below the current offer price A sell limit order is usually placed above the current bid price Stop Order: A stop order to trade at the market when a specified price trades. So a buy stop at 6460 will become a market order to buy as soon as 6460 or higher trades. A sell stop at 6410 will become a market order to sell as soon as 6410 or lower trades. A buy stop is placed above the current market A sell stop is placed below the current market. The Pros and Cons of Market Orders. A market order will always be filled immediately; it is therefore a useful order when you have to get in or out of the market. Most obviously if you have a losing position and you are uncertain what to do, get out with a market order. The main disadvantage of market orders is that you do not know the price that you will be filled at, it may be worse than the price that was available when you first entered the order. The difference between the price you hoped to trade at and the price that you actually get filled at is called slippage. Slippage represents 22 one of the hidden costs of trading and for an active day trader it needs to be minimized. If you trade 100 times a day, an average of 0.5 points slippage per trade will cost 500 in the FTSE futures market! The Pros and Cons of Limit Orders. With a limit order you specify the worst fill price, so with a limit order there is no slippage. The main disadvantage to using limit orders is that there is no guarantee that they will be filled. So if I have a limit order to buy 1 FTSE contract at 6432 and the market trades at 6432 (but no lower), I may not get a fill. This could happen if, for example, my buy order was entered after a 10 lot order to buy at 6432, so for my order to be filled 11 lots would need to trade at 6432. The market operates on a first come first serve basis. |
|
