Then there is the ubiquitous I wish I went market when the limit is missed by one or two ticks and the trade works for 75 points. Personally I use both kinds of orders. Sometimes within the same trade. No guru "holy grail" rule on this guys. Yesterday all my orders were limit. Thursday on the reversal break, I had a sell stop to take me in. That by the way guys is a mkt order once the price hits. I never use stop limits. If my trade is wrong I don't want to be losing 40 ticks because I did not want to pay 5.00 extra. Successfully, Alex L. Wasilewski Co-Founder & Head Trader Trades That Work www.puretick.com 1-877-GOLONG1 ( 1-877-465-6641 )
Never use market orders. You ever see a stock that normally trades say in the 16 dollar range then see it spike down to 15 on a 100 share order and go right back to 16? Thats a market order where they basically just screwed someone for 1 dollar. If you want a market order to sell, then hit the bid price with a limit order. If you want a market order to buy, then hit the ask price with a limit order. You will still get filled at the best price and you are less likely to get screwed by your broker or market maker.
Unless of course the market is really shifting and leaves your limit order merrily sitting in the book. Could be an expensive choice if the market is moving against your position. As I said, IMHO there are no absolute rules. Best results are obtained by tailoring your execution strategy to the individual scenario.
Depends on the granularity of the data you are trading from. If you are using real time tick data, scan the level II dom for liquidity and trigger market orders you can calculate your expected fill, slippage etc. and get filled really fast. Especially true if your computer is placing and monitoring your trades. Basically for CME globex: they can process trades every 14ms. For CME typical Electronic execution on your brokers side is inside of 60ms.. Credit check, order release and fill. Fill confirmations can sometimes lag though. If your trading FX your trading against your dealers order book and data feed... all bets are off. Point is you need to be monitoring the DOM to the second or better to use market orders and should trade exchange based instruments that are liquid. If you are trading off any chart... 1 minute, 5 minute etc... Limit Orders all the way. I read another suggestion to place limit orders a tick or two below market. Still a Hit or miss proposition if your data is not to the second but effective for 90% of the chart traders. I have a hard time understanding with all of the technology available why anyone would test there skills to point and click a market order versus entering your targets into a computer and let it monitor and place the trade without the element of human error.
Use market orders to exit a losing trade in a fast or medium paced market. Otherwise, use limit orders.