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I seem to be seeing a misconception out there in the RT community about how
a limit order really works and what its value is. This misconception is
this: the public trader is getting the benefit of the bid/ask spread by
using a limit order. NOT. That would only happen if the order is executed
opposite another broker executing another customer order, not opposite a
local. It happens, but not really very often. What is really happening is
that the market bid/ask has moved such that your bid is now at the offer.
That is not the same thing as getting any edge that locals have.
Also, often, practically by definition, a limit order is filled at the very
moment that market momentum is going against the trader. Think about it. Is
that what you really want?
Gwenn Ael Gautier wrote:
> I am a private trader and trade TBonds through the desk of a big house
> in London. Before that, I traded big size for institutions.
>
> My personal stats and experience confirm precisely the same. I always
> put in limit orders. There is no shadow of a doubt one is much better
> off not canceling replacing. there is a trick though, which is there is
> indeed 10% of the time, you HAVE TO cancel replace, and you have to be
> quick or you end up chasing the market. So you have to learn when to
> cancel replace soon enough so as not to have to chase the market, but
> only 10% of the time...
>
> Really this is one tick saved per side on average on 90% of my trades,
> or $62.50 for 9 RTs out of 10: a lot of money indeed if you are short
> term trader...
>
> Cheers,
>
> Gwenn
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