Limit Orders

Rule:

Always use Limit Orders when buying or selling stocks. Hitting the buy and sell button is asking for trouble.

If you are a small trader, like most of us, you may see wild swings in your buy or sell prices when compared to the market price if you don’t use the limit option. Brokerages may fix you up with a buyer or seller with an unfavorable price if you aren’t careful.

A Limit Order should only be used while you are in the market during the trading day. If you let the order stand indefinitely or for mutiple days to try to catch some upside or protect your downside, you may regret it the next time a Flash Crash occurs. You should read up on the Flash Crash, you WILL see them again and using the Limit Order, for a short duration, is your only protection.

More info on the Flash Crash can be found here.

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