Limit Orders Aren’t Always The Devil In The Casino

The biggest investment enemy is the one we face in the mirror.

Our fear, greed (and sometimes a delusional sense that we can somehow see the future) affect solid investment plans. But smart investing has just three simple rules:

  1. Build a diversified portfolio of low-cost index funds.
  2. Rebalance once a year.
  3. Never speculate–and don’t let anyone speculate on your behalf.

That’s it. Follow these simple rules and, over your lifetime, you’ll beat the pants off most professional investors, after fees.

But there’s a pesky little devil that likes to tempt us all. It wants us to gamble, to guess the market’s direction. It wants us to dance in the stock market casino.

Such temptations sometimes hit us when we’re making trading orders. We’re left with a choice.

Should we place a market order or a limit order?

Images by Pixabay

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Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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1 Response

  1. Daniel says:

    When you are buying a stock you can usually see the current bid and ask prices. You could just set a limit order for the current ask price which will be slightly above the market price and you are pretty much guaranteed to get your order filled at that price. This is easier than trying to figure out what price is slightly above market price, but still reasonable.

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