Choosing Market Order or Limit Order as a Day Trader

When you are a day trader, you will have the option to choose a market order or a limit order every time that you place a trade in the market. A market order is a type of order that goes directly into the market at the best available price. A limit order allows you to specify the exact conditions that you want filled before your order goes through. Here are a few things to consider about choosing the proper type of order.

Control

One of the biggest differences between the market order and the limit order is control. With a market order, you have very little control over what happens once you submit your order. With a limit order, you have full control over what goes on. Therefore, if you are the type of trader that likes to control everything that happens with their trading, you may prefer to go with a limit order.

Speed

Another factor that you will have to take into consideration is the speed of the trade. When you have a situation in which you need to get into the market quickly, the market order is the way to go. With this type of trade, you will immediately get into the market, regardless of what the current market price is. If you place a limit order, the price that you specify may not be available for some time. This means that your order would not be placed and you can miss out on a profitable trading opportunity. In short, you should take into consideration how quickly you need your trade to be placed when you are deciding which type of order to take.

Delayed Trading

Some stock trading strategies involve delayed trading methods. With this type of trading method, you may not want to necessarily take a trade at this exact moment. Instead, you want to set it up so that if the price of a stock reaches a certain point, you can get involved in a trade. In this case, using a limit order is the way to go because you can specify the exact entry point of your trade. Should the market moves in that direction, you can take advantage of a trading opportunity.

Cost

The costs of trading should also play a role in your decision. If you take a market order, you could end up paying a lot more for a security than you want to pay. This means that you will potentially not make as much money on the trade as you should. When you put a market order in, any broker could come along and charge you a random price for the stock. When you utilize a limit order, you can lower the impact of this occurrence and get the stocks at the prices that you want to pay for them. This can increase your profitability as a stock trader overall.

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