InvestorQ : How and when should I place a limit order in the market?
Nikita Damle made post

How and when should I place a limit order in the market?

Answer
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2 years ago


Unlike in a market order, in a limit order you can choose the price of your liking. Whether it is a buy order or a sell order, the limit order will be executed at or better than the price at which the order is placed. Limit orders are a more specific type of order where the best price is also mentioned in the order as a necessary condition. So if the stock of RIL is quoting at Rs.940 and you want to buy the stock at Rs.930 then you can set that as your limit price. What it means is that the order will only get executed at Rs.930 or lower. Even if the price of the stock goes to Rs.931 and bounces back then the order will not be executed as it does not meet the market price condition. The market order will be executing at the limit price or lower in case of buy orders and at the limit price or higher in case of sell orders. The limit order works perfectly in case of markets that are very volatile. In such cases, market orders can get out of hand and limit orders can manage risk a lot better. As a trader, you need to remember that limit orders can also be modified based on the evolving market conditions and can even be cancelled if the price movement is not favouring the limit order. Limit orders are also flexible in the sense that they can be converted into market orders if required. When you trade, a lot predicates on how you place orders as that has an important bearing on your price of entry and your overall cost.


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K V RAO answered.
1 year ago


Before you consider limit order, become aware of support levels. The following example will clarify the point:

For example, Reliance Industries is quoting at Rs.940. So that's the market rate. So many investors commit an error of putting the limit order at Rs.930 or Rs920. This is incorrect. Get into technicals. Find out what's the support level? Let's say Support 1 level is 923 and Support 2 level is 915. Then your limit order should be 923 with a stop loss at 913. I hope this clarifies.


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Prithvi Ram answered.
3 months ago


Market orders get you in or out fast
The biggest advantage of a market order is that your broker can execute it quickly, because you’re telling the broker to take the best price available at that moment. If you’re buying a stock, a market order will execute at whatever price the seller is asking. If you’re selling, a market order will execute at whatever the buyer is bidding.
The biggest drawback of the market order is that you can’t specify the price of the trade. Many times that doesn’t matter, however. For large companies that are highly liquid (trade in high volumes), the difference between buyers’ bid price and sellers’ ask price — called the bid-ask spread — is usually just a penny or two. Unless you’re buying huge numbers of shares, that difference doesn’t matter.