FREQUENTLY ASKED QUESTIONS
Readers almost ask the same questions. Hereby you will find the most recurrent questions but we urge you to get in touch with us if something is not clear or you feel that you need to be confirmed you well understood.
A limit buy order aims to purchase the stock at a lower price relative to the current one. Example: the stock is trading at 100 and we want to buy at 95 so that we place a buy limit order at 95. As soon as the price falls our order will be inserted in the bid column in the book and executed as soon as the market will come down at 95 or better underneath 95.
It is the reverse than a buy limit order, in this case the aim is to to bring home the profit so that if we bought at 100 and currently the stock is trading at 110 we place an order to sell the full position at 120 LIMIT which means that our order will be placed in the book at the ask column at 120 at executed as soon as an investor will be willing to purchase at 120 or at a higher price.
Not all the buy and sell limit orders are executed because it depens on how much orders are at the same level with how much volume. If you buy limit order comes second at the 95 dollars level with 2000 stocks and another investor placed the order before you with 1000 stocks if the sell order that will hit the 95 price will be for just 1000 stocks then you will not buy at the 95 price. It means that if the book will move immediately upwards you will still be willing to buy at 95, but since somebody bought at 95 the trading system will consider executed your purchase even if you are still flat. This examples shows how much important is to keed track of all the real trades in order to compare them to the theoretical results. Usually up to a 20% difference is normal on illiquid stocks, on liquid stocks 5-10% could still be acceptable.
Every investor must evaluate the risk / return profile of every strategy according to his personal needs. We are publishing a newspaper and not making a customized advisory service so that we simply do not want to reply to this question.