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No. of Recommendations: 1
"The data indicate with DDT that a market order costs you about $0.50/share or 1.9%."

Paul,

Trying to claim that "the data" say such and such is as ridiculous as the pro-vaxxers trying to claim that "the science" says that mNRA technology is safe. Right now, at 10:05 EST, DDT is 25.95 x 26.28, with a last of 26.022.

Market orders are NEVER filled at the 'ask'. Always, there is 'price improvement'. The improvement might be slight. But it always happens. So let's say a would-be buyer does submit a market order , which he/she should NOT be doing given the wide spread. What's the worst that could happen? A fill at 26.28, right? In such a case, by how much he/she "overpay". That's hard to say, because he/she would NEVER get filled at the bid, but something between the split and the ask.

The spread is 0.33. The split would be 26.115. If the buyer got 26.25, the "overpay" would be .135 cents, which as a percentage of the purchase price, would be 44 beeps, not your exaggerated 1.9%.

Second, wide spreads are NOT caused by illiquidity, but by market makers, because I can point to plenty of situations where the EFT almost trades by appointment only, but the spread is a very tight, one penny wide. That's what would-be buyers need to pay attention to. If the spreads is tight, using a market order causes little harm and might actually result in a better fill than trying to be clever with limit orders. (I've experienced this too many times for it to be denied.) OTOH, when spreads are wide and the trading in that security isn't "orderly", then limit orders should be most definitely be used. But they need to be intelligently placed limit orders, or else you won't get a fill.

All of the preceding is merely a report of my experience. Each person will have to decide for her or himself what makes the best sense to do.

Arindam
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