So here's why I like to use LIMIT orders.... and this is really probably only really useful for those buying larger amounts of shares -- but it is also something that all of you should know and understand.
This morning I put in some buy orders -- a couple for "DAY ONLY" -- in other words if the price I chose doesn't fill the order - then the order expires today...
Another one -- for Chevron (CVX) -- I chose "Good til expired" -- that is good for 60 days. The reason I chose that type of limit order is because I put a bid in way under where the shares are currently trading. CVX pays a dividend ($1.00) on MONDAY -- I hope the shares dip at least that $1.00 on Monday and therefore my order might get filled. If that works - then I effectively picked up the dividend even though I didn't own the shares on the EX date. Obviously I only pick up the dividend IF -- BIG IF -- the shares recover sometime within the next day or two.
I also like to scale into shares. I buy very large lots... and scaling in is important to my overall mental health -- as well as I can am "closer" to the market for the stock. Putting in a limit order helps me scale in --- and even though the shares might go below my purchase price -- I'm still closer in cost basis to where the shares are currently trading. Today I put in a limit order for Terra Nitrogen (TNH) -- I put that limit order in "day only" at $204.00 per share... for 1000 shares. So far I've bought a whopping 75 shares. But my point is -- once I put in that order - whenever their is a seller willing to match my price - I'm automatically buying. If it doesn't get filled completely -- who cares. Tomorrow is another day... and if the shares are going up -- then I've made some money on what I did buy... and if they're going down or staying steady -- then I'm at least closer (with my lower buy per share) that I would be if I just built a "market" order.
If I'm not in a hurry (rarely) to build the positions --- then I put in limit orders that are .50 or 1.00 LOWER than the "low" for the day. If it's a stock I just want to buy -- then I might be only .10 or .20 under the "market" price. That way when it dips just a bit during the day -- I'll most likely get a fill.
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