Why Limit Orders Are Important

Posted by -Jay on 19 April, 2009

This post was filed in Stock Market and has

First off what are limit orders?

A limit order is setting a exact price you are will to pay for a stock, oppose to market orders which mean your willing to pay what ever it takes to get the stock.

Limit orders may be very frustrating because you don’t always end up with the stock because it doesn’t drop down to the price you set but in the end it will save you A LOT of money. And many times will be the difference between you making or losing money.

Many times I’ve put in a order for a stock and set the price at for example $3.00 and the next day the stock will drop from $3.10 to $3.01 but never $3.00 so I don’t get it. And in the following days the stock would rise up to $3.75 leaving me on the outside looking in.

But on the other side if I just set it to market pricing and the next morning that stock that closed yesterday at $3.00 and in after hours trading gets bid up to $3.20 and opens at $3.20 and I get in at $3.20 and the stock ends the day at $3.05, on the day the stock is actually UP $0.05/share but you are DOWN $.015/share. And $0.15 is a nice sized hole to be on quickly all because you didn’t use a limit order.

This is apart of my reminders at the bottom of my stock homework checklist (post coming this week on that) because it’s one of the most important parts of buying a stock.

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