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Investing Basics - Market Orders
If you have ever purchased a stock on your own without the help of a broker, you’ve likely seen several different order types for placing your trade.
The most common is a “market order.” When you use a market order to enter or exit a position you will get filled on the trade at the current market price. The biggest benefit of this order type is it will guarantee you get filled. The drawback of using a market order is it doesn’t guarantee you will get filled at the best price. For example, you may see a stock is trading at $20.00 and when you place your market order to buy it you may get filled at $20.20.
If you consider yourself a longer term investor these minor differences don’t have a large impact on your investment. However, if you are a short term active investor looking to take small profits out of the market, these differences can add up and you may need to consider other order types that can guarantee your price.
That being said, sometimes I want to be in the trade no matter what. In that case, the added cost of a market order is the better option versus risking missing out on the opportunity all together.
What is your “go to” order type for entering a trade?
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