Use the limit order to get a good deal

The concept of a limit order is that the investor only desires to buy an asset for no more than a specified price or sell for no less than a specified price.  The limit order is an option that is offered by stock trading brokers.  In this case the principle is the same.  A buy limit order limits the price of what you are willing to buy the stock for and a sell limit order limits what you are willing to sell the stock for.

The opposite option of a limit order is a market order.  In this option your buy trade is immediately executed against whatever is the best available selling price.  The problem here is that price may be higher than the current reflected per share price.  The orders go through a computer system, where buyers and sellers are matched and the market “clears”.  Your buy transaction may be the unlucky one that clears a percent or two above market price.

Avoid this by maintaining your cool and willingness to wait to get into or out of a stock.  The market is efficient, but people are not.  By taking this into account, setting a limit a little lower than market price for a buy, and perhaps using the 30 day or good till canceled option; you can buy the stock that you are looking at for a modest discount.  Or as a seller, your patience can be rewarded by gaining a premium for your investment sale.

About Steve @ FPO
Hello FPO readers, I have been writing on financial topics for about 12 years now, but I have only recently reignited the fire of publishing online. I have to say, its good to be back. I am an electrical engineer by trade who enjoys all topics engineering and financial. I started Financial Place Online (FPO) to create a value added financial news and education website that would provide a refreshing daily financial read. Financial Place Online websites are built around the principles of consumer empowerment, leveling the playing field, zero spam tolerance, and none of those annoying sidebar or banner ads. For us, it's all about enjoying a good read.

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