How much room for a limit order?

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

  1. laeott

    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

    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)