Futures For You by Carley Garner
LIMITS TO LIMIT ORDERS
When is it appropriate to use a limit order to enter a market, and when should they be avoided?
As a reminder, a limit order is one in which execution is permissible only if it can be done at a price named by the trader, or at a better price. You might hear this order type referred to as an “or better” order.
Most traders are probably familiar with order types — specifically, the difference between a limit order and a stop order. Yet many of them use various order types to their detriment rather than their advantage. For instance, they may miss trades because of unfilled limit orders while attempting to save a measly $12.50, or buying a futures contract on a stop at a price that ends up being the high of the move.
Clearly, what is a better price for buyers is not for sellers. A buyer would be better off with a lower price (cheap), and a seller would be better off with a higher price (expensive). This is like anything else in business, or life for that matter, so if you look at things logically it will sink in.