Friday, March 16, 2007
Limit vs. Market Orders
This question was asked recently on the www.moneysense.ca forum whether it’s better to use limit orders or market orders. Personally, I always use limit orders. I usually put them in for a 5 day period but will occasionally adjust them (depending on the market). Using limits has caused me to miss some opportunities in the past (sometimes within a penny of my strike price) but it has also allowed me to buy some good companies 3% to 5% lower than a market order would have. I am a long term investor so the 5% initial savings will add up over the long term and will hopefully make up for any missed opportunities. Although, there’s no problem with market orders I would definitely advise that investors who purchase low volume stocks use limit orders in order to avoid any spikes caused by liquidity issues.