EasyEquities has introduced limit orders on their platform. So what are limit orders and what does this mean?
Initially, you could only buy instruments at the prevailing market price at the time of purchase (this is called an @market order). They also allow after market placing of orders, i.e. when you place an order while the market is closed (from Monday to Friday after 5pm and before 9am, and on weekends). Your order would remain pending until the market starts to trade again, and it would then be executed at the prevailing market price.
A limit order simply means choosing the maximum price you want to pay for the instrument you have chosen or the minimum price when selling. Your order will remain pending until the market trades at that price.
How it works on EasyEquities.
It works as a limit order on the bid and ask price you see when you make the purchase or sale. This means when you’re buying you can limit your purchase to the current ask/sell price or lower. The inverse applies to selling. You can limit your selling price to the current bid/buy price or higher.
Let’s look at an example with the Purple Group (JSE code: PPE).
The share is trading at R1.45. The buying price (bid) is R1.43 and the selling price (ask) is R1.45. The difference between the two is called a spread.
If you’re using an @market order, your order will get filled at the price when your order was executed, because the price of PPE could have changed between you clicking “buy” and your order getting filed you may pay more than the current R1.45.
If you choose the limit order option and the price moves higher from when you click “buy” and your order gets filed, it won’t be bought unless the price is the same or lower than the current R1.45. If it’s higher, the same applies and your order will remain pending until the stock trades at or below the ask price.
Unfortunately, you can’t specify the actual prices you want on your limit order as Easy Equities hasn’t introduced limit orders in their full entirety. You can only select the current bid if selling or ask if buying.
Personally, I like limit orders as it gives me control of the price I pay or sell at. I do hope they allow me to set my price, but for now, this new feature does mean I won’t get any surprises when buying or selling.
Cash Club blog
Njabulo Nsibande is a Just One Lap user-turned-contributor and a founding member of an investment club. His “Cash Club” blog details his experiences balancing the financial obligations of a young parent with his investment aspirations.
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