Review of real time futures quotes::What You Need to Know About E Trade
An earlier piece, "Placing Stock Orders Like a Pro," discussed market situations in which limit orders were preferable to market orders.
Generally, for non-professional investors, that's most of the time.
The best exceptions are market orders placed before the opening when other indicators like stock market futures indicate the overall market is going your way and you have some reason like breaking news to want to insure that your orders are executed.
If you are using market orders while the stock markets are open, you can use real time quotes to try to improve on your executions.
Let's say, for example, that you want to buy 100 Shares of Occidental Petroleum (OXY) on a day when the overall market is churning around without a clear trend.
You check the "Real-Time" quote, hopefully through the web site of the discount broker on which you plan to place the trade, and see that the last trade was a minute ago at a price of 74.33 and that the current bid is 74.28 and the current ask 74.35. You also note the "size" of these offers, perhaps noting something like 4500 shares bid at 74.28 and 1200 offered at 74.35.
At this point, indications are that the larger amount bid is putting pressure on the buy side and you can begin putting your computer cursor near the "Submit order" indicator for your "Buy 100 OXY market" order.
It might start moving up in which case you should proceed forthwith.
On the other hand, you might see a quick drop to 74.10, for example, on an increase in volume of 20,000 shares as some institution sells a block.
Keep watching and buy on the first move up after this, having saved perhaps $25 on a hundred shares. Limit orders are similar.
With markets so volatile, you should probably place them as "Day" orders, saving the "Good till Cancelled" (GTC) orders for longer range positioning.
Using the OXY example of 74.28 bid/74.35, if you wanted to use a limit order rather than try to ride the market, you could enter a limit buy order at, say, 74.30.
Check the quote.
On any responsive quoting service, it should now show your bid of 74.30 as the bid on the exchange.
On an actively traded stock like this, you have an excellent chance of an execution, which probably saved you five bucks from having entered a market order when you chose a limit. The same tactics apply after closing and with less actively traded stocks where the "spreads" between bid and ask prices are larger.
You might see OXY quoted after the close at a close of 74.42, 72.75 x 100 bid, 76.45 x 100 asked.
Orders accumulating overnight will dictate the opening price and you can set a limit by using the closing price and adjusting it in accordance with any company news, stock futures and your own attitude.
Using limit orders after checking late news and market direction is a rewarding discipline whose small trading edges will be of lifetime benefit.
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