How to choose your limit order price?

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MrBeaver
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Joined: Tue Nov 14, 2017 4:45 pm

How to choose your limit order price?

Post by MrBeaver »

How do you do this?

I’ve found that converting to ETFs has caused me to try to ‘game’ the market by placing sell limit orders higher than the last price, and buy limit orders below the last price. Nothing major, usually within the typical daily variation of the ETF.

Essentially, when rebalancing, I can’t do it as a ‘one stop shop’ by using proceeds of a (day-close mutual fund) sale of X dollars to buy X dollars of a different security. This means I have to execute two separate orders, a sell, and then submit a buy after the sell has executed. This makes every buy/sell order feel like a game, and there have been times when my rebalancing sell orders haven’t triggered that day and instead triggered a few days later - which seems risky. It also forces me to do ‘twice as much work’ when rebalancing.

I also encounter this when selling company stock in my ESPP for instance. We don’t have the option to pre-sell at open, so I have to put some sort of order in after the shares are granted.

So for those who use limit orders, how do you do it without making rebalancing more complex, or creating dangerous emotional decisions that could backfire?

My setting limits slightly above/below has probably netted me a decent benefit, but it’s almost impossible to track by how much, seems like an arbitrary decision, and just feels like I’m ‘trading’ rather than investing.
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vineviz
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Re: How to choose your limit order price?

Post by vineviz »

MrBeaver wrote: Thu Dec 31, 2020 5:50 pm How do you do this?

I’ve found that converting to ETFs has caused me to try to ‘game’ the market by placing sell limit orders higher than the last price, and buy limit orders below the last price. Nothing major, usually within the typical daily variation of the ETF.

Essentially, when rebalancing, I can’t do it as a ‘one stop shop’ by using proceeds of a (day-close mutual fund) sale of X dollars to buy X dollars of a different security. This means I have to execute two separate orders, a sell, and then submit a buy after the sell has executed. This makes every buy/sell order feel like a game, and there have been times when my rebalancing sell orders haven’t triggered that day and instead triggered a few days later - which seems risky. It also forces me to do ‘twice as much work’ when rebalancing.

I also encounter this when selling company stock in my ESPP for instance. We don’t have the option to pre-sell at open, so I have to put some sort of order in after the shares are granted.

So for those who use limit orders, how do you do it without making rebalancing more complex, or creating dangerous emotional decisions that could backfire?

My setting limits slightly above/below has probably netted me a decent benefit, but it’s almost impossible to track by how much, seems like an arbitrary decision, and just feels like I’m ‘trading’ rather than investing.
Just stop using limit orders?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
000
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Re: How to choose your limit order price?

Post by 000 »

You could try the midpoint of the bid-ask spread.
Jack FFR1846
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Re: How to choose your limit order price?

Post by Jack FFR1846 »

I'll set it at the ask when buying, bid when selling. I'm using the limit to avoid the rare anomalies like the price spiking up 30% for 3 seconds when I'm buying.
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vineviz
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Re: How to choose your limit order price?

Post by vineviz »

Jack FFR1846 wrote: Thu Dec 31, 2020 6:00 pm I'll set it at the ask when buying, bid when selling. I'm using the limit to avoid the rare anomalies like the price spiking up 30% for 3 seconds when I'm buying.

If you must use limits this is the way to do it, though of the OP needs to enter the order befor markets open then they’ll need to set the limits well outside the quoted bid-ask spread to ensure execution
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
lazynovice
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Re: How to choose your limit order price?

Post by lazynovice »

Sounds like you are using some thinly traded ETFs? VTI, VOO, VTEB, etc usually have a bid ask spread of one penny. Do you just really like the very specific ETFs?
000
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Re: How to choose your limit order price?

Post by 000 »

Sometimes I even set my buy at the bid and my sell at the ask! Radical, I know!
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GerryL
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Re: How to choose your limit order price?

Post by GerryL »

MrBeaver wrote: Thu Dec 31, 2020 5:50 pm
So for those who use limit orders, how do you do it without making rebalancing more complex, or creating dangerous emotional decisions that could backfire?
The only stock I own is my former employer's. Too much. I am using it to load up my DAF over the years. If added income from a stock sale works with my tax planning for the year, I may decide to sell some shares when I see that the price has been on a upward trend. Yeah, a bit of timing, but I avoid the emotion by just picking a desired sale price a few dollars above the current price and accepting what I get.

If I hit near a peak, great. If I hit and it keeps on going up, okay. In either case, I have the additional income that fit into my plan. If I was too high and never make the sale, no big deal.

I don't worry about rebalancing because I have left the stock out of my portfolio for retirement planning purposes. But I invest the $$ from the sale into the balanced fund in my taxable account.
livesoft
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Re: How to choose your limit order price?

Post by livesoft »

Just break your order(s) into 2 halves or 3 thirds and submit different orders for those shares to figure out what you like. For instance, suppose you want to sell 47 shares of VTI which is trading at 194.24. You could submit a sell order for 20 shares with limit 194.50 and a market order for 27 shares. You will soon learn not to fear the market order. And since the limit order won't execute right away, you can always change it to 194.28, and then to a market order. :twisted:

Since there are no commission nowadays, I thin this is a good way to be fearless and have some fun.
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