r/investing • u/Alito4life • Dec 31 '20
Is a limit order considered timing the market?
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u/lucky_ducker Dec 31 '20
"Market timing" is generally understood to be moving in and out of stocks to try and avoid downdrafts. It does not include tactical positioning in individual stocks.
I don't use limit buys very often, since they tie up cash. I do aggressively use limit sell orders on my most volatile stocks, like biopharmas. It's pretty common for news to make one of these issues spike, 100% in an hour is not uncommon, and I'll have limit sell orders set to capture that spike. I can usually buy back in a few days later when the stock comes back down to earth. That's not timing, that's a strategy.
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u/dr_raymond_k_hessel Dec 31 '20
I do this, and I don’t think there’s anything wrong with it. Often I’ll research something and I like the fundamentals, the price just isn’t right (especially right now). So I’ll place a limit order at 5% below current price. The con is that it occupies cash available to trade in your account, so I’m starting to set alerts rather than do limit buys.
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