Fills On Limit Orders Above Inside Market

[RichieC]

When a stock is moving very fast I don’t feel comfortable entering a market order as it could result in me being filled well above where the price was at when I placed the order. I therefore always use limit orders but this can sometimes result in me missing a trade. I’ve often thought that the best solution would be to send a limit order that’s a few cents above the inside market price as this would essentially be a market order but with a cap so I couldn’t be filled too far from where the stock is trading.

I’ve never actually tried this though because I’m unsure of exactly how things work. I’m concerned that if I send a limit buy order for $50.10 for a stock that is trading with a bid of $50.00 and an ask of $50.05 that I will simply be filled at $50.10.

I would be very grateful if someone could confirm what would happen in this situation - would the ECN give me the shares that are available at $50.05 or is there a chance that I could be filled at $50.10 even if the inside market doesn’t move from A$50.05-B$50.00? Would the behaviour vary between ECNs and in general is this a safe thing to do?

Thanks for any advice you can offer on this issue.

 

[dcraig1]

You will be filled at best ask ie 50.05, within constraint of number shares offered at best ask. Also, of course, providing somebody else doesn't get in first.

 

[Directional]

a limit order is an order for "x price or better" so if you put a bid limit above the ask you'll get the current ask if there is enough depth.

Its a good way to avoid slippage more than what you price in.

 

[RichieC]

Thanks a lot for the help. I had been concerned to try it out in case I got filled at my limit price but I'll feel a lot more comfortable doing that now I know I'll just get filled at the inside market price.

Thanks again.