There is really no reason to ever use a market order. We get price improvement on about 25% of our listed trades when not using NX, using limit orders. Market orders are generally a rather foolish mechanism (by definition).
Don There have been quite a few different discussions on this. When I am trading momentum I will use market orders when I can measure that the momentum will last for greater than 5 minutes. That type of momentum limit orders won't be filled on the NYSE. On NASDAQ you would actually have to use selectnet to hit a market maker heavily away from the market. Market orders/limit orders both have benefits and drawbacks. It depends on the situation. The strategies you teach your traders it doesn't usually make sense for the market order. There are quite a few times I would have never been able to trade if not for market orders. Robert Tharp
"get human greed and inefficiency out of the middle. Thats my opinion." NO, NO, NO!!!!! I worship human greed and inefficency.
gh, I only use limit order strategies when shorting stocks. Hence, some momentum strategies where I use stop/market orders on the long side I do not use for shorting. It's one of the drawbacks of being a retail player.
Being greedy myself I want first dibs, not second. I agree, without those two vices there would be no advantage.
Your points are, of course, valid. The point I am trying to make is: Since the NYSE Specialist is the only person who can execute market orders (thus causing them to be "batched" - which can take some time), when limit orders can be executed quickly by the NYSE clerk, we recommend that our traders use limits "past NBBO" pricing to facilitate the trades more quickly. Since we generally get price improvement anyway, it gets the job done a bit more quickly in most cases, and the pricing is usually better. Market orders on the NAZ are a whole different story, as you well know.
Hi Don, I thought that market orders on the NYSE had priority over limit orders of the same price and thus market orders would always get filled first. Now you're saying that limit orders can get filled before certain market order?
I admit to not being that expert on listed trading. However, is there any circumstance short of an all out panic exit that would cause you to use a market order, particularly on a thin stock? Chasing momentum? I think you will almost always get filled at the end of the move. It's not always the fault of the specialist, there could just be an air pocket. Who wants to sell when it is obvious the price is rocketing higher?
I short on the NYSE with market orders all the time. I rarely get a fill that's outside the bid-ask spread. I've never had success shorting on a limit at the NYSE. The biggest issue is the slow processing of market orders - in particular when the market in moving