Nigel Ramsay

Wellington, New Zealand

When I buy and sell shares, should I just click 'market price'?

19 August 2020

You should usually put in a limit price. Otherwise, you will get whatever other investors are offering - and there will usually be some poor value offers on the market.

Setting a limit price

Selecting a limit price avoids this possibility. When you set a limit, your trade will be saved onto the market. When another investor offers shares for sale at this price (or a better price), then your trade will activate - and your purchase will be made.

ASB Securities - order screen

The market depth view in ASB securities (below) shows all outstanding buy and sell offers on the market.

ASB Securities - market depth screen

Selling “at market”

If we wanted to sell 10,000 Vector (VCT) shares “at market”, they would (normally) trade immediately. The price we would sell at would be:

  • 843 shares at $4.20
  • 4,000 shares at $4.19
  • 2,388 shares at $4.15
  • 2,769 shares at $4.10

So you can see that we would not get a particularly great deal on these. But, if we set a limit price of $4.20, we would probably sell them “today” as the market price fluctuates during oer the day.

If we were not in a hurry to sell, then we could try setting a slightly higher price of say $4.25 or $4.30 but that may take several days or weeks to sell. Or may not even sell at all, so could be frustrating.

I normally will set a price whenever buying or selling that is marginally in my favour - but not too different. That is a nice balance between a speedy sale and a good price.

Note: the same logic applies when buying. I generally set a limit price at all times.