Page 279 - THE MARKET WHISPERER

THE MARKET WHISPERER 27 5

• Pending Limit buy order
I am watching a stock trending strongly up, and intend to buy. I don’t

want to buy it at a high price, but rather I want to wait for it to pull down
so that I can buy if and when it drops. For example, the stock price reached
$30.60 and I want to buy if and when it drops to $30.25. I enter a buy limit
at $30.25 and click the buy button. The order is ready for execution, but is
not immediately filled when I hit the button. Instead, it waits for the price
to drop to my limit, and is then executed when someone sells shares to me.

• Pending Limit sell order
I bought a stock at $30 and plan to sell if it rises by 30 cents. I enter the

sell limit order at $30.30 and click the sell button. The order is waiting in
the system and will not be executed immediately, but only when the sell
limit is reached.

Market order

The market order, by contrast to the limit order, indicates: “I want
to buy or sell now, no matter what the price is!” This order is executed
immediately when the button is clicked, hitting all shares available for
sale until I am filled. For example, if I try to buy 2000 TEVA shares via a
market order, I will immediately get the quantity I want, but at what price?
According to the supply we saw in the Level II window, I will receive 1700
at $54.26, 100 more at $54.27 and 200 more at $54.28. That’s not bad for
shares with high liquidity. If I try to buy 2000 shares with low liquidity
using the market order, I may in extreme instances jump the stock price
by tens of cents, and then discover that when I want to sell, there are not
enough buyers. The market order is therefore very effective and fast, but
useful only when you want stock with high volume.

Example of order execution
I want to buy 1000 TEVA shares by a market order. I enter it into the

stock box as follows:
1. Enter the symbol TEVA [1]
2. Enter the quantity of shares wanted, in this case 1000 [2]
3. Choose the “market” order in the window [3], eg: ARCAM
4. Click the BUY button [4]

Advantage: This is a fast way to enter a trade because you don’t have to
enter a price, skipping one field of work, but you must use this order only
for stock that allows a broad “market depth”, ie: are of high volume.