How much room for a limit order?

Discussion in 'Order Execution' started by laeott, Aug 24, 2007.

  1. laeott


    How much room do I give for a limit order in order to catch a trending stock up. For example I placed a limit order for TEO at 25.60. It got filled at 25.59. Another limit order I placed was for CHL at 61.50. The order never got filled and is at 63.75 now. Should I give more room for my limit orders. For Example if the stock is at 22.14. Put a limit order for 22.75 instead of 22.30?
  2. lindq


    The main considerations in using limit orders are volume, volatility and spread. So each trade will be different.

    If you have a stock with smaller volume, a lot of volatility, and a large bid-ask spread, you need to give yourself some room. Conversely, for a stock with a lot of volume and a small spread you can be tighter, or use a market order if you are trading direct access.

    Personally, I only use limit orders when the stock is very volatile and I'm concerned about the possibility of a bad fill if the price jumps on me. Otherwise, if I see a trade that I want to be in, I don't want to risk getting passed on the fill and missing the trade, so I'll use a market order. Yes, I've been wacked a couple times, but generally I find it is the wiser choice. (My broker is IB)