Marketable Limit Orders Explained For Beginners

Marketable Limit Orders

The world of day trading is fast-paced and intense.

Profits can turn to losses in a matter of seconds if you hesitate or enter your order incorrectly, especially if you’re trading in volatile sessions.

Precision is critical when day trading if you want to maximize your profits and minimize your losses.

In order to be precise with your trades, you not only need to understand technical signals on a chart, but also the types of orders you can place when executing a trade.

Using the wrong order type could leave your trade sitting unexecuted or getting filled at an unacceptable price.

If precision is the goal, you need to utilize more than just basic market orders. Here are a few of the basics to understand, including how to use what’s called a marketable limit order. 

Understanding Order Types 

Using different order types will ensure that you get as close as possible to your ideal price on your trades. Some order types can even be used in conjunction to limit losses.

These are the five basic order types your broker will present you with. 

  • Market Orders – A market order is an order that will immediately be executed at the best available price. When you place a market order, you’re looking to get your order filled immediately and aren’t overly concerned with slippage in the purchase price.

Brokers are required to fill orders at the National Best Bod and Offer (NBBO) price per SEC regulations, meaning they have to supply the best available price. However, the best available doesn’t always mean the price you want. Market orders are best used for highly liquid stocks like large caps.

  • Limit Orders – A limit order doesn’t execute right away but will trigger when a certain price is reached. For example, if you wanted to buy Stock A at $10.65 and it’s currently trading at $10.85, a limit order can be set to automatically execute a buy when the price dips to $10.65.
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