It’s sad, but, once again, I’ve become bored with the market. I know, I know … objectivity and emotion-free are the buzz words when dealing with the market, yet, here I am. If I hadn’t already taken a vacation, I would recommend that, so, in lieu of a vacation, I suggest I deal with something else, sort of.
Here is a long question from a reader. I have broken into parts and answered each as best I could, given that I have no context …
- What would be the safest way to make an order on the market?
That depends on what you are trading, how you are trading it, and what your strategic approach is, among other things. For example if you want to buy a fast-moving stock that you believe has a short time to run, you get in with a market order. If you believe a stock will keep trending up over time, shoot for your best price with a limit order.
If you are selling, the same holds true. Market orders get you out quickly and limit orders allow you to hold on. As well, trailing stops allow you to hold on while automatically moving your limit.
- I am a bit concerned about the problem of too much slippage when making a market order. This is why I am more leaning towards making limit orders, but I am worried it will not be filled or would take too much time.
There is a whole lot of worrying like a day trader going on here. Slippage and missing orders imply you are in a hurry. Yes, it might take a while to get your order filled, and yes, you might not get it filled with a limit order, but that brings us back to your strategy. For example, you could have other orders pending and if any of those fill first, you cancel your other orders. You could also place conditional orders, so that if this happens then that happens. This, then, means you have time. If you are day trading in the minute, you don’t have this luxury.
- With that in mind:
- Should I make a limit order with a slightly higher price than its current market value and if so by how much?
- In what cases would you recommend me making a market order?
- What would be considered high or medium volume to buy stocks and expect your orders to be filled in quickly?
- Let’s say a stock is trading at 5 dollars a share with good volume, are you able to buy (with the everything or nothing condition) it with a limit order at that price and if it goes up to 6 $ a share are you able to sell it in the same way or is that unlikely to happen?
- If not at what price should I buy it at to buy it with a limit orders?
Okay, we got just a bit too much going on here, so let me say this. If you are trading $5 stocks, then you need to be concerned with liquidity, the ability to get in and get out when you want to get in or get out. This depends on volume. A decent minimum volume for a $5 stock is 500,000 – 1,000,000. You can probably get your price in or out, depending on your lot size, and if you are not in a hurry, limit orders work well. If you want to make sure you get in and out, a market order will do it, most likely.
Sorry, I could not be more specific …
Trade in the day; invest in your life …
