3 ms·

If you truly want to sell or buy no matter the price, then sure, use a market order. But most of the time there will be a price that is too low/too high for you

by iamdave 10y ago

If you truly want to sell or buy no matter the price, then sure, use a market order. But most of the time there will be a price that is too low/too high for you to want the order to execute. Well...yes, exactly; bordering on a flat out "duh". Isn't this kind of the entire point of a market order? If you're convinced this is the price you're going to enter a position at, you're able to do so; otherwise you'd open a LIMIT order if the price is too low/too high for whatever trade strategy you're utilizing with margin trading. That's the entire reason market orders exist as another commenter points out. That doesn't mean no one should ever use market orders. Traders have different risk tolerances that inform their trade decisions; saying "no one should do it ever" seems like leaving an awful lot of nuance about currency (and other securities) strategy and price action on the table. If I've misunderstood your point, I'm open to a correction here, but I don't think what you've replied with is a wholly convincing argument on its face.

philipodonnell 10y ago
I think its a matter of deciding which risk is the largest part of your current position, time or price. If your biggest risk is time because you're forced to enter an order or you might miss the move or you need to enter an order quickly/automatically and can't take the time to figure out the best price, then a market order is fine. If you biggest risk is the price (and you can afford to wait) then a limit order is better because you can essentially dictate the price at the expense of it maybe taking a long time/never to fill. They're just tradeoffs between risks, much like most other decisions in the market.
MichaelGG 10y ago
It seems unlikely that someone would enter a sell limit at 0 or a buy at $MAX. That's what a market order is. Liquidating an account seems like one of the few times one would ever use it.
evanpw 10y ago
> If you're convinced this is the price you're going to enter a position at, you're able to do so If you want to trade at the current price, then you'd send a limit order with the current price as limit price. The difference between that and a market order is in what happens if the price moves in the milliseconds between you clicking the button and the order executing: a limit order won't execute (or in general, will execute only if the price didn't move further than the limit you've set), while a market order will execute no matter what happens, even if your $100 stock had a flash crash down to 1 cent. That's basically never what you want.
vidarh 10y ago
> If you're convinced this is the price you're going to enter a position at, you're able to do so; This is a prime examply of why to give the advice to never use a market order. This is exactly the type of situation where a limit order is the right choice rather than a market order, as with the market order you don't know that this is the price you'll enter the position at. If you enter a market order based on that thinking, you risk losing a lot of money, because you are making an unjustified assumption that the price can't/won't move all that much before it is filled. It's unlikely you're looking at the market price and think "if I place that market order now, I might end up selling at 30% below that/buying at 30% above that". But that can happen. On crypto exchanges, not only can it happen, but e.g. on smaller exchanges trading lesser coins against BTC it's not at all unusual for it to happen (e.g. you have have coins fluctuating up and down between 3-4 satoshi). Saying you should never do it is hyperbole, but the cases where there is a good reason to not enter a limit order instead are exceedingly few. Most of the times when people use market orders it tends to be lack of a trading strategy or lacking tools (panicked issuing of market order to account for lack of having suitable orders in place to protect you) or lack of understanding of the risk. I'd argue that the vast majority of the time, if you find yourself thinking you need a market order, maybe you do need it then and there in an urgent rush, but if so you should treat it as a warning sign that you may be doing something wrong (e.g. you don't have the right tools or strategy in place to protect you against risks) and re-evaluate what you're doing.

by iamdave 10y ago

philipodonnell 10y ago

I think its a matter of deciding which risk is the largest part of your current position, time or price. If your biggest risk is time because you're forced to enter an order or you might miss the move or you need to enter an order quickly/automatically and can't take the time to figure out the best price, then a market order is fine. If you biggest risk is the price (and you can afford to wait) then a limit order is better because you can essentially dictate the price at the expense of it maybe taking a long time/never to fill. They're just tradeoffs between risks, much like most other decisions in the market.

MichaelGG 10y ago

It seems unlikely that someone would enter a sell limit at 0 or a buy at $MAX. That's what a market order is. Liquidating an account seems like one of the few times one would ever use it.

evanpw 10y ago

> If you're convinced this is the price you're going to enter a position at, you're able to do so If you want to trade at the current price, then you'd send a limit order with the current price as limit price. The difference between that and a market order is in what happens if the price moves in the milliseconds between you clicking the button and the order executing: a limit order won't execute (or in general, will execute only if the price didn't move further than the limit you've set), while a market order will execute no matter what happens, even if your $100 stock had a flash crash down to 1 cent. That's basically never what you want.

vidarh 10y ago

> If you're convinced this is the price you're going to enter a position at, you're able to do so; This is a prime examply of why to give the advice to never use a market order. This is exactly the type of situation where a limit order is the right choice rather than a market order, as with the market order you don't know that this is the price you'll enter the position at. If you enter a market order based on that thinking, you risk losing a lot of money, because you are making an unjustified assumption that the price can't/won't move all that much before it is filled. It's unlikely you're looking at the market price and think "if I place that market order now, I might end up selling at 30% below that/buying at 30% above that". But that can happen. On crypto exchanges, not only can it happen, but e.g. on smaller exchanges trading lesser coins against BTC it's not at all unusual for it to happen (e.g. you have have coins fluctuating up and down between 3-4 satoshi). Saying you should never do it is hyperbole, but the cases where there is a good reason to not enter a limit order instead are exceedingly few. Most of the times when people use market orders it tends to be lack of a trading strategy or lacking tools (panicked issuing of market order to account for lack of having suitable orders in place to protect you) or lack of understanding of the risk. I'd argue that the vast majority of the time, if you find yourself thinking you need a market order, maybe you do need it then and there in an urgent rush, but if so you should treat it as a warning sign that you may be doing something wrong (e.g. you don't have the right tools or strategy in place to protect you against risks) and re-evaluate what you're doing.