when setting a limit price for a stock?

Question

what does market price mean. Also when setting the limit price does it go off the sale price or the last price?

Answer 1

A slight correction on the definition above for market price.

In the NASDAQ, a market price is the bid or ask price for a given number of shares offered or asked by the market maker. So a bid of 50 ask of 51 at 200x100 is an offer to buy 200 shares at 50 or sell 100 shares at 51. If you want to buy 300 shares, that price no longer holds. Also, the price listed for market price does not hold on the exchanges AT ALL.

So if you entered an order to buy 300 shares, 200 would be at the listed price and another 100 would be either matched to limit orders or at whatever price the maker wishes to sell at.

A market order on an exchange is an instruction to your broker to go to the floor of the exchange and to continue bidding until you are the high bidder if buying or low bidder if selling. It is a buy at all costs or sell at all costs order. Usually, however, it occurs near the last price.

A limit order is an order to buy or sell a stock, but in the case of a buy order it limits what the broker can pay per share. So a buy order of 1000 shares limit 52 would instruct the broker to bid for you at the best price possible to get 1000 shares, but under no condition pay more than 52 per share, ignoring commissions and fees. The reverse is of course true for sell orders.

The price you set a limit at is totally up to you. You can choose any mechanism to set a limit price you would like. If you thought the stock was worth 75 per share and selling at 51 you could set it at 75 even though it is materially unlikely it could reach that price.

Likewise, if you were wanting to sell, but there was no way you would accept less than 45, then that is your limit price.

Limit prices are based upon your strategy, so there is no fixed answer. They are more important with high volume trades because large purchases will shift prices.

Orders on the market are filled, if ever, in the following manner:

market orders
limit orders based upon oldest first that are in the money
if in the money limit orders are tied as to time, then the higher price prevails
If offer prices are the same, then size of order prevails, largest before smallest
If they are still tied, they toss a coin although now they use a random number generator.

Answer 2

Wow...... you have no clue how big a mistake you're making. Setting a limit price for a purchase has to do with liquidity, ATR and a host of other issues...... that doesn't even take into account the fact that a penny stock is the last thing a new trader should be doing. The general rule of thumb would be to wait 3-5 years after you're very successful trading shares above $5. Now let's talk commission. If your trades cost you $7... then a round trip in this stock will be $14. So your stock has to go up $14 before you break even........ You should have read some books before even opening a brokerage account. Learn this stuff. what you're doing is gambling... not investing.

Answer 3

Market price means you take the price offerred at the time the sell order or buy order is recieved. A limit order sets a place where the order will activate, but does not guarantee that price will be what you pay. In other words, once the price hits the limit the order is active and will be filled at as close to that number as possible.

Answer 4

A limit purchase is just basically buying a stock with a built in price ceiling. If the price of the stock reaches X dollars, then it is automatically sold. You use this basically if you are a good analyst and you have a target price that you expect the stock to hit.

The price ceiling is referred to as the limit price. It is reached when the price of the stock is sold equal to that price. So when you are making a limit order you specify the usual stuff (number of shares, etc.) and add in the limit price, a price higher than the current price per share.

In your case market price just refers to the limit price!

-The Net Fool

Answer 5

Market Price means the price where people are selling or buying.

Which means if you buy at market price means whatever price people are selling, you buy

When you sell at market price means whatever price people are willing to buy you will sell.

Where as limit price is the opposite, if you put a limit price means you only want to buy at that price anything above that price you will not buy

When you are selling it is the same, you only want to sell at that limit price anything below that price you will not sell.

I hope this is simple enough for you to understand