how to BUY shares (at best or Limit)

[jonboy123]

hi,
when i have bought shares i have chose "at best" or something like market value.
Then the offer is made, and i either accept or decline.

Is this the best way to buy shares?

Or should i use Limit Order? "at limit"
Where i can specify a price to buy at.

eg. share price 20p
BID 18p
ASK 23p

When i try to buy at best market value, i would get something like 23p or even 25p.

What would happen if i put a limit order to buy at 20p ? Get rejected? Then i can just put limit order in for say 21p.
Or do i have to pay the ask price, no matter what?

If i buy at Limit, would the shares get bought straight away? Or would it be waiting, until the ASK price dropped to my Limit order price? and so maybe they NEVER get bought....

thankyou.

 

[raysor]

hi,
when i have bought shares i have chose "at best" or something like market value.
Then the offer is made, and i either accept or decline.

Is this the best way to buy shares?

Or should i use Limit Order? "at limit"
Where i can specify a price to buy at.

eg. share price 20p
BID 18p
ASK 23p

When i try to buy at best market value, i would get something like 23p or even 25p.

What would happen if i put a limit order to buy at 20p ? Get rejected? Then i can just put limit order in for say 21p.
Or do i have to pay the ask price, no matter what?

If i buy at Limit, would the shares get bought straight away? Or would it be waiting, until the ASK price dropped to my Limit order price? and so maybe they NEVER get bought....

thankyou.

You need to llok at level2. I think you are always trading FTSE100 aren't you. That's order diven. You put your order in at what price you think. Look at the other trades. \what are they going through at? If the price is 102-104 you can join the bid at 102 (you buying) or 102.5p. Or just pay the 104 which is on offer (presuming enough shares to satisfy your purchase.

 

[jonboy123]

You need to llok at level2. I think you are always trading FTSE100 aren't you. That's order diven. You put your order in at what price you think. Look at the other trades. \what are they going through at? If the price is 102-104 you can join the bid at 102 (you buying) or 102.5p. Or just pay the 104 which is on offer (presuming enough shares to satisfy your purchase.

i dont think i need to look at level2. Im not day trading.
All of my trades have been AIM or some other small cap indice (all UK based)

"You put your order in at what price you think."
what price i want? well, thats the lowest (matching the current share price)

Look at other trades? Who's?

So Limit order to BUY is the way to go? it would get filled or not straight away? no waiting around....im gonna test all this out when market opens with my broker....

thankyou.

 

[raysor]

i dont think i need to look at level2. Im not day trading.
All of my trades have been AIM or some other small cap indice (all UK based)

"You put your order in at what price you think."
what price i want? well, thats the lowest (matching the current share price)

Look at other trades? Who's?

So Limit order to BUY is the way to go? it would get filled or not straight away? no waiting around....im gonna test all this out when market opens with my broker....

thankyou.

If you are using a broker you leave it to him. he should have the expertise and experience to get you the best price. There is no point putting a limit on that you don't get and then the stock goes up so you have lost a profit for being tight. There is no hard and fast rule. If you are trading AIM stocks it's gonna be MMs. If you haven't got Level2 you can't see what's going on. Let's say the shares are 17-20p. If it's going up and the MMs don'rt want to sell stock you won't get them less than 20p. If the size is 5000 and you want 10000 you might have to pay 21p or may not get them at all.

 

[jonboy123]

If you are using a broker you leave it to him. he should have the expertise and experience to get you the best price. There is no point putting a limit on that you don't get and then the stock goes up so you have lost a profit for being tight. There is no hard and fast rule. If you are trading AIM stocks it's gonna be MMs. If you haven't got Level2 you can't see what's going on. Let's say the shares are 17-20p. If it's going up and the MMs don'rt want to sell stock you won't get them less than 20p. If the size is 5000 and you want 10000 you might have to pay 21p or may not get them at all.

im using online execution brokers.
If im told straight away i dont get my Limit order to buy, i can then increment until i do. If i have to wait and wait for the market...then thats not ideal as you said, i could miss out...for being tight.

Yeah level2 sounds nice, but i dont do this 8am to 4.30pm mon to fri. Im just planning on swing trading for now.

trial and error... ill see how it goes.
cheers.


ps...ive wondered...when you click to buy, and decline....does this actually affect the share price....?....because if i keep declining....each subsequent OFFER is often slightly cheaper..... or maybe this is just the real time price changing..... in my favour.

 

[raysor]

im using online execution brokers.
If im told straight away i dont get my Limit order to buy, i can then increment until i do. If i have to wait and wait for the market...then thats not ideal as you said, i could miss out...for being tight.

Yeah level2 sounds nice, but i dont do this 8am to 4.30pm mon to fri. Im just planning on swing trading for now.

trial and error... ill see how it goes.
cheers.


ps...ive wondered...when you click to buy, and decline....does this actually affect the share price....?....because if i keep declining....each subsequent OFFER is often slightly cheaper..... or maybe this is just the real time price changing..... in my favour.

How does your particular online platform work? Your entry might get routed to "best ex" or to a person or to the RPS or, If it's Hoodless, their MM. If you find this out then you will get the answer to your question. If a limit order for a large order gets into the market it might effect the prices or at least alert the market that there is a potential large order floating around.

 

[Aspire]

If you buy at market you are buying from someone else who has a limit order on the offer.

If you put a limit order on the bid you have to wait until someone wants to sell to you at that price.

So, no, you cannot put a limit order in and get filled immediately - you have to wait until someone wants to sell them to you... and yes, using a limit order you could miss out because the price moves in your favour before someone agrees to sell it to you at your price.. It's really pretty simple.

 

[jonboy123]

If you buy at market you are buying from someone else who has a limit order on the offer.

If you put a limit order on the bid you have to wait until someone wants to sell to you at that price.

So, no, you cannot put a limit order in and get filled immediately - you have to wait until someone wants to sell them to you... and yes, using a limit order you could miss out because the price moves in your favour before someone agrees to sell it to you at your price.. It's really pretty simple.

right, thanks.
I read an interview with a professional trader who said he only uses Limit orders. I think he was day trading.

So if you want some shares, in a swing trading mentality, its best just to go with best market price and accept whats offered?

so you gotta wait on the limit order to buy.... say if you change your mind and you wanna buy at current maket price.....that may be classed as another trade. ie cancelling the limit threshold and just buying......

so what strategy would you recommend? waht do you do?

 

[jonboy123]

How does your particular online platform work? Your entry might get routed to "best ex" or to a person or to the RPS or, If it's Hoodless, their MM. If you find this out then you will get the answer to your question. If a limit order for a large order gets into the market it might effect the prices or at least alert the market that there is a potential large order floating around.

selftrade:
1) "deal at best"
2) "limit order" "buy no higher"
Limit orders are typically used by investors who expect a price to move from present values but do not have time to watch these movements closely.

hoodless:
We do not charge to enter a limit and if executed you pay only our standard commission


they do not say anything about cancelling the llimit and just buying at Best. Ill test out the methods with my next trades.

 

[Shanghai]

When are you actually placing your orders? if you are placing them when the market is closed to be filled at the open then you are very likely to get very bad fills at that point, particularly with AIM / small cap as they are not so liquid. if you can wait until after the first hour you should do better.

Thereis also the question of why are you buying shares directly and hence paying 0.5% stamp duty of course when you are swing trading (presumably each trade is a few days)? You could easily end up blowing 20% of your account on tax each year before you have made a penny.

 

[jonboy123]

When are you actually placing your orders? if you are placing them when the market is closed to be filled at the open then you are very likely to get very bad fills at that point, particularly with AIM / small cap as they are not so liquid. if you can wait until after the first hour you should do better.

Thereis also the question of why are you buying shares directly and hence paying 0.5% stamp duty of course when you are swing trading (presumably each trade is a few days)? You could easily end up blowing 20% of your account on tax each year before you have made a penny.

ive made all my trades during uk trading day times.
At best market prices offered to me.
I did not even know that we could buy AFTER the market is closed, with a limit order, until today.

why am i buying shares directly? what other way is there to buy shares?
im just using online execution only brokers.
i dont understand tax and what i am doing.
When ive had a BUY or SELL....the stamp duty etc...are all taken into account....
BUT WHAT ABOUT TAX? say if i start making thousands, how do i get taxed?

i made a handful of trades last month...3 or 4....one today.....

all im taking into consideration is commision and what my P&L says online.......

theres no diff in stamp duty or tax with "at best" or but at limit, is there?

 

[Shanghai]

why am i buying shares directly? what other way is there to buy shares?
im just using online execution only brokers.
i dont understand tax and what i am doing.
When ive had a BUY or SELL....the stamp duty etc...are all taken into account....
BUT WHAT ABOUT TAX? say if i start making thousands, how do i get taxed?

i made a handful of trades last month...3 or 4....one today.....

all im taking into consideration is commision and what my P&L says online.......

theres no diff in stamp duty or tax with "at best" or but at limit, is there?

The issue with UK shares as I mentioned is that each time you purchase some then you pay a tax of 0.5% and that is irrespective of whether you have a winning or losing trade. If you are making say 4 trades a month and using your entire account then you will be paying around 6% in tax a year. If you make 8 trades then you could be paying 12% of your account in tax each year even if you have no winning trades. This is one of the reasons for the popularilty of spread betting. With spread betting you don't pay stamp duty on your trades.

With regards to stamp duty payable with a market order or a limit order you are correct, there is no difference in stamp duty payable, which is 0.5% on each.

 

[raysor]

The issue with UK shares as I mentioned is that each time you purchase some then you pay a tax of 0.5% and that is irrespective of whether you have a winning or losing trade. If you are making say 4 trades a month and using your entire account then you will be paying around 6% in tax a year. If you make 8 trades then you could be paying 12% of your account in tax each year even if you have no winning trades. This is one of the reasons for the popularilty of spread betting. With spread betting you don't pay stamp duty on your trades.

With regards to stamp duty payable with a market order or a limit order you are correct, there is no difference in stamp duty payable, which is 0.5% on each.

I think spread betting is still more expensive. I was looking at Kryso. Market price 4-5p (should be able to buy under 5p) IG. (June) 3.9806-5.0407. I make SG dearer even taking into account 0.5%.
By the way it's not a duty but a tax.(Not that it matters)

 

[Shanghai]

I think spread betting is still more expensive. I was looking at Kryso. Market price 4-5p (should be able to buy under 5p) IG. (June) 3.9806-5.0407. I make SG dearer even taking into account 0.5%.
By the way it's not a duty but a tax.(Not that it matters)

Maybe the issue with Kryso is that it is a very small cap and illiquid. Probably the SB companies are not that interested in making a market for it.

With a larger cap just taking an example as ANTO as I closed a trade on that yesterday. IG is quoting 5629-5646. Buying 1000 shares would make the cost of the spread 17 pounds. Buying the shares directly you would incur the 0.5% tax of 28 pounds plus the bid/offer spread.

 

[jonboy123]

The issue with UK shares as I mentioned is that each time you purchase some then you pay a tax of 0.5% and that is irrespective of whether you have a winning or losing trade. If you are making say 4 trades a month and using your entire account then you will be paying around 6% in tax a year. If you make 8 trades then you could be paying 12% of your account in tax each year even if you have no winning trades. This is one of the reasons for the popularilty of spread betting. With spread betting you don't pay stamp duty on your trades.

With regards to stamp duty payable with a market order or a limit order you are correct, there is no difference in stamp duty payable, which is 0.5% on each.

so the tax is decucted as we trade automatically....say if we make £10,000 profit per year....we dont need to pay any extra tax at the end or deal with tax issues after? eg...its kinda reagared as income isnt it? eg...national insurance contributions and all that....

tax is unavoidable...so i dont undersatnd what you are saying.... paying a little tax is not a reason to NOT trade shares....

ive read a little on spread betting and CFDs....i dont see the diff in the definiton of spreadbetting compared to CFD....you just settle up on the diff...... so how is it diff?
can you trade uk equities with a spreadbet?

 

[Shanghai]

so the tax is decucted as we trade automatically....say if we make £10,000 profit per year....we dont need to pay any extra tax at the end or deal with tax issues after? eg...its kinda reagared as income isnt it? eg...national insurance contributions and all that....

tax is unavoidable...so i dont undersatnd what you are saying.... paying a little tax is not a reason to NOT trade shares....

ive read a little on spread betting and CFDs....i dont see the diff in the definiton of spreadbetting compared to CFD....you just settle up on the diff...... so how is it diff?
can you trade uk equities with a spreadbet?

The 0.5% is payable when you buy UK shares, this is irrespective of whether your trade makes money or not. Assume that you do well and make 10,000 a year, if you are buying shares directly you will likely be subject to an additional tax on the profits. The IR like to get their cut of course. If you make the same profit using spread betting then those profits are (currently) tax free so you gain both ways. There are however some downsides to spread betting and if you look at some of these threads you will learn what they are. However in my opinion if you are not scalping then you shouldn't run into too many problems.

Have a look at IGindex for example and you will get an idea of the markets you can trade with them.

For the difference between CFDs and Spread betting you could do worse than read this:

The Investor's Toolbox, 2nd Edition: How to Use Spread Betting, CFDs, Options, Warrants and Trackers to Boost Returns and Reduce Risk: Peter Temple: Amazon.co.uk: Books