Which buying order to use?
I will never use a market order in buying an ETF. With a market order you always buy immediately at the best possible rate. Sounds great, but it isn’t. Very often there is not so much trading going on in ETF’s which means that the spread may be very wide.
The spread is the difference between the bid price and offer price. The bid price is the price at which buyers want to buy the ETF. The offer price is the price at which sellers will want to sell their ETF’s.
This gap or spread may be very significant if the market is moving heavily. I will always buy with a limit order. By doing that I will explicitly give a price I want to buy. I will always choose a price in between the bid and offer price.
Due to the actions of market makers bid and offer prices are constantly on the move and I stand a good chance that I will get in for the price I am willing to buy. Sometimes I will lose out on a trade but when I get in I have bought the ETF at a discount.
That is already a good start on my way to the expected return. A bit of experience is required to play out this game well but I love doing it and it’s making me money.
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