An Introduction to Limit Order Books
machow.ski
machow.ski
Then I read a book by Fischer called "Common Stocks, Uncommon Profits"which suggested that when you have a long investment horizon, say 5-10 years, and you have done the research to have the confidence, a limit order gives you no real benefit.
Say a stock is $100 today. In 5-7 years you expect it to be $500, the benefits of doing a limit order are less significant.
>the “benefits” of waiting increase roughly in line with the risks of not getting a fill. That seems to indicate the market is especially efficient at pricing liquidity.
[1] see: "chart 4" https://www.nasdaq.com/articles/an-interns-guide-to-trading-...
In crypto markets the difference between maker and taker fees can sometimes make it worth waiting, but you need to keep in mind that every minute you spend not having made the trade, is price risk that you are exposed to. And saving 5bps on fees might lead to you losing 50bps in price movement.
By definition all of the former are contained in the latter category. But not vice versa, with the set difference being “marketable limit orders”. That is orders with instructions to not trade beyond a set price, but where that price is set wide enough that we expect the order to cross the market and fill at arrival.
I think what you’re saying is why use a pure market order instead of a marketable limit. And there I mostly agree with you. There’s not much argument besides convenience of not having to fill in the limit price.
But in terms of market impact, marketable limits are no different than market orders. In fact to everyone else, they look identical in the data feed.
For even medium sized institutional funds? Absolutely. Think of it this way. If market impact didn’t exist for anybody, then we’d expect prices to never move.
The tool I used to make the page is a static site generator called Hugo. The theme I used is called Cactus (https://github.com/monkeyWzr/hugo-theme-cactus). I made some minor modifications, but I really liked the style when I saw it. That reminds me that I need to put a link at the bottom to the author.
EDIT: I also highly reccomend using a static site generator for a blog. I used to use wordpress and I found it to be very cumbersome.
IE. They would both sit there with the best bid at 10 and the best ask at 10.5.
If these orders were the other way around (buy at 10.5 and sell at 10) then what would happen would depend on which order was submitted first.
If the buy was submitted first, then the sell order would be aggressive. This would result in a trade at a price of 10.5 (the price of the passive order) which would be a better price for the sell order.
If the sell order was first, then the trade would happen at 10 which would be a better price for the sell order.