limit orders and market orders?

Question

when i buy at limit it takes like an hour or so to get the order threw or sometimes it never gets threw, when i buy at market i usually pay extra then what the price is going for, such lbak, i bought it at exactlly at 8:30 am and the price was at 7.30 and i had to pay 9.26 for it and the price was 7.20. explain?

Answer 1

Okay, the stock market is split into two types of markets, auction markets on the exchanges and dealer markets on the NASDAQ.

In the auction markets, buyers bid against other potential buyers and sellers bid against other potential sellers when placing limit orders. If your order isn't the best price possible, then it doesn't fill until or if it becomes the best possible price. Market orders, on the other hand, instruct the "specialist," who is the auctioneer, to pay whatever price is being asked when buying or sell at whatever price someone will bid, regardless of the amount. So if there is only one order to sell and it is away from the market, the specialist may fill it near the market to keep the market orderly, or the specialist will simply fill the order at the distorted price. On the exchanges, the specialist has a duty to keep the market orderly so they would likely fill it from their own inventory and shift their purchase and sell price (bid and ask) to cover their own risk.

On the NASDAQ, you are facing a dealer market. The market maker(s) chooses the price in a market order. It can be any price the maker believes will not trigger profound risk to their own position. On the NASDAQ dealers publish their price continuously and they are obligated to provide shares in the quantity they specify at the price they specify. If your order is well away from their volume limits, they can radically shift the price. So if they are offering to sell 100 shares at 7.30 and you order 1000 shares, they will fill 100 shares at 7.30 and either estimate the price they need to cover the other 900 shares, or find limit orders out there and fill them at the limits, no matter how far away those limits are.

So when entering orders, always use limit orders unless you have a very high degree of confidence the price will fill near your order price. You can use market orders on the NASDAQ if you obey their volume limits.

I suspect your order overloaded the volume limits. On a very high volume day only 1/10 of 1% of all shares available trade. The stock market is very illiquid. If you place an order for 10,000 shares of Wal-Mart you will shift the price 4% and that is Wal-Mart. Once you move away to the smaller shares, the differences can be unbelievable.

I have seen positions that took 3-4 months to close out because it was in positions that were illiquid. And that is placing daily limit orders too. It is easy to get into a position, but it can be very difficult to get out.

One additional comment, orders placed in extended hours trading, like your order, are not binding on dealers. They can fill any order at any price as long as someone has a limit order out there. In your specific case you placed a market order before hours. There was likely one limit order out there, that was placed far away from the market. Likely somone placed a good til cancelled order to sell a stock if it ever reached a certain price, ever. That was the only open limit order so you filled it.

Answer 2

Definitely a limit order. If you set a limit order, the broker will only execute your buy order up to a certain price that you specified, otherwise if you set a market order, they don't really care which price they execute your order at. This means that you might be paying an additional 1-2% more with a market order. You set market orders if you don't think the price will fluctuate that much during the day and if you're planning on investing long term. I highly recommend limit orders regardless because you can save a few dollars here and there.

Answer 3

I would talk to your broker...I would think that they should be protecting you from this...sometimes on thinly traded stocks, at open and close, there won't be any orders out there for you to hit with a market order...believe it or not, there are people out there who watch these stocks and intentionally place limit orders a couple bucks off the last price to take advantage of this situation...scurrilous to be sure.

Answer 4

you got screwed. a limit order gets the price that you want, either buying or selling

a market order gets you who knows what, espically on a thinly traded stock, sometimes you get a price not even close to the current price

go with the limit orders

Answer 5

Your first mistake is entering a new position at the open. There's a saying on The Street, "Amateurs open the market, professionals close it." I have tons more info on my site, www.theoptionsadvisor.com

Answer 6

You are wasting your time and money. You can't beat the market. You don't have the mechanics to do that. Buy a mutual fund that your advisor recommends and keep it FOR EVER!!

Answer 7

Hi... your question has me a bit lost .... shall we say.... what does "such lbak"..... mean...????? Plus the thing in general makes no sense @ all..... are you drinking...??