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I rarely trade but have enough times to learn the various types of orders one might place, order books, spread, and a few other things. Why doesn't an order t

I rarely trade but have enough times to learn the various types of orders one might place, order books, spread, and a few other things. Why doesn't an order type exist like: > "I'll pay the number shown, or something close to it" ? Like: acquire/lock all units to fulfill me market trade and if it is less/more than what i expect, cancel.

pikchurn 9y ago
A limit order. Specifically a fill-or-kill limit order for the cancellation part. Most people don't realize a limit order isn't "buy at this price" but rather "buy at the best price in my favor, but don't spend more than this much." Fill-or-kill means don't put it on the books, just get it now or cancel. You can also typically specify whether it is a partial fill-or-kill too (get it all or none at all).
- bryanbuckley 9y ago
  TIL! Much thanks. Are you sure this (buy at best price in my favor) is how it is implemented commonly (e.g. the limit order is not just rejected for being an invalid liquidity maker order?)? I guess it is the Fill-or-Kill that is key; I suppose you can add an additional factor to that limit order to give yourself a range of acceptable prices (obviously you could program it, but is it a common order type on something like E-Trade?)?
  - pikchurn 9y ago
    "In your favor" is how it is required to be implemented by law. You get the absolute best price on the books at the time it hits the exchange. Of course that doesn't stop low-latency firms exploiting information differentials to get their bids in before your order makes it to the exchange, a process called front-running. It would be illegal for your own brokerage to frontrun you, but pretty much all discount brokerages sell information to third parties, which enables those third parties to front-run. Ever wonder why your Robinhood trades are free?
beaner 9y ago
Because the time between when you've made the decision to place the order and when you actually physically place it is enough time for the market to shift drastically. "The number shown" may be different in fewer milliseconds than it takes the signal from your brain to reach your finger, plus the delivery time for the web request to the server. A couple markets have had flash crashes down to pennies. Imagine placing a market sell order right before that happens, selling your bitcoin for $0.15 instead of $15,000. In reality you're usually somewhat safe, but market orders are always a small gamble for this reason.

pikchurn 9y ago

A limit order. Specifically a fill-or-kill limit order for the cancellation part. Most people don't realize a limit order isn't "buy at this price" but rather "buy at the best price in my favor, but don't spend more than this much." Fill-or-kill means don't put it on the books, just get it now or cancel. You can also typically specify whether it is a partial fill-or-kill too (get it all or none at all).

bryanbuckley 9y ago
TIL! Much thanks. Are you sure this (buy at best price in my favor) is how it is implemented commonly (e.g. the limit order is not just rejected for being an invalid liquidity maker order?)? I guess it is the Fill-or-Kill that is key; I suppose you can add an additional factor to that limit order to give yourself a range of acceptable prices (obviously you could program it, but is it a common order type on something like E-Trade?)?
- pikchurn 9y ago
  "In your favor" is how it is required to be implemented by law. You get the absolute best price on the books at the time it hits the exchange. Of course that doesn't stop low-latency firms exploiting information differentials to get their bids in before your order makes it to the exchange, a process called front-running. It would be illegal for your own brokerage to frontrun you, but pretty much all discount brokerages sell information to third parties, which enables those third parties to front-run. Ever wonder why your Robinhood trades are free?

beaner 9y ago

Because the time between when you've made the decision to place the order and when you actually physically place it is enough time for the market to shift drastically. "The number shown" may be different in fewer milliseconds than it takes the signal from your brain to reach your finger, plus the delivery time for the web request to the server. A couple markets have had flash crashes down to pennies. Imagine placing a market sell order right before that happens, selling your bitcoin for $0.15 instead of $15,000. In reality you're usually somewhat safe, but market orders are always a small gamble for this reason.