Market Orders for muppets

[daybyday]

Grief ! Why am I finding this so difficult to get my head around this???

I'm looking to trade the mini dow through a direct access broker. Bid/offer price is say 99/101 and the price is rising.
I want to buy on a LIMIT price and every piece of blurb is saying I should buy below the current market price!!! WHY must I buy below the market price and wait for it to fall? What if I was to buy ABOVE the market price with a limit? i.e Limit 101
On the brokers DEMO site the order still goes through OK, but on their LIVE site would I get my knuckles wrapped for buying above the market price on a limit?

Or have I completely lost it and there is no problem whatsoever in buying above the market on a limit???

Thanks for your reply (and patience!)

 

[TWI]

You need to understand that a limit order is one that is at a price better than currently available if you are buying above or selling below the market you would place a stop order, not a limit.
e.g. Market trading 99 at 101 you could place a "market order" to buy and lift the 101 offer or a "limit order" at 99 and hope you get hit or a "stop order" at 102 and if 102 trades you will then execute.

 

[peto]

You can enter a limit order at 101 if you want to. You will probably get filled immediately, but if the price suddenly spikes as you press the button then you will not get filled above 101. Your order will sit there until the price settles back down to meet it.

edit:- Another choice you could make is to enter a buy limit order at 100. On your screen you will see the bid price rise from 99 to 100 as your order shows up. With a liquid market like the mini dow (YM) it's probable that someone will soon sell to you, as you will be 'first in the queue' of bids at 100.
pete

 

[Directional]

yep, if you place a limit order to buy at or above the current ask, ie: 101, you're entering an order for 101 or better (less). Since there are offers to sell at 101 you're basically placing a marketable limit order. a market order that wont be filled at worse than the price you entered it at.