Intro to buying through brokerage?

[sheepstache]

Can someone point me to a resource for buying through a brokerage account?  I just opened a Vanguard one so I can add some ETFs.  I don't know if I strictly need ETFs right now but thought it would be fun to play around with some small amounts just to learn about it.

It offers the option to buy "market," "limit", "stop (loss)," and "stop limit."  I understand what each one is but I'm wondering what real people do in practice.  In this case I'm looking to buy the vanguard intermediate bond etf (BIV).  My instinct is to put in a buy order for slightly less than the current price and give it a 60-day limit and expecting it will get there in the next couple days.  But what numbers should I be looking at to make this decision?  Like, do you just look at a graph of values over the past month to get a feel for what the highs and lows are and how often it swings?  It's at 87.9 now and was at 87 or below three times in the past month so I figured I might be safe asking for 87 (or 87.01 if that would be more likely to get me a sale than people who put in 87).  Or 87.5 if I wanted to buy sooner.  Or do you look at the NAV?  Or do most buy-and-hold people just do a market buy?  Putting in a limit makes me feel like I might be making it too complicated but it seems silly to not try to get a lower price when it varies by +/- 50 cents just over the course of the day, y'know?
Sorry if these are very stupid questions.

[dragoncar]

It's different for traders, but for buy-and-hold I just put in a limit order for a little over the market price.  Good for a day.  (Edit: this is to avoid a "flash spike" occurring, which should be very unlikely) If I really want to get it over with, I'll do a market order.  But I'm not trying to eke out every single penny.  If you want to save some, you can do as you suggest (limit slightly less than current price) but if it starts taking off you may get frustrated.

All of the above is for buy-and-hold for securities I know I want to buy, and which is close to a reasonable price.  If you think it's worth, say 10% less than current price you could put in a 60 day limit order, but I consider that more akin to trading.  Honestly I'd rather wait until it comes down 10% and then put in a market order than leave a trade on the books for that long (you might miss a flash crash, but at least you are in control).

[KingCoin]

First,

My instinct is to put in a buy order for slightly less than the current price and give it a 60-day limit and expecting it will get there in the next couple days.  But what numbers should I be looking at to make this decision?  Like, do you just look at a graph of values over the past month to get a feel for what the highs and lows are and how often it swings?  It's at 87.9 now and was at 87 or below three times in the past month so I figured I might be safe asking for 87 (or 87.01 if that would be more likely to get me a sale than people who put in 87).  Or 87.5 if I wanted to buy sooner.  Or do you look at the NAV?  Or do most buy-and-hold people just do a market buy?  Putting in a limit makes me feel like I might be making it too complicated but it seems silly to not try to get a lower price when it varies by +/- 50 cents just over the course of the day, y'know?

1) You should just buy the asset if you want it in your portfolio and not screw around with trying to get a better price. Yes, if you put a bid just below the current market, there's a good chance you'll get filled. However, there's also a chance that asset rallies for awhile and you don't get filled at all. Because the asset is likely to generate returns over time, your below market bid has a negative expected value. You can think of it this way: there's a high probability that you save a little money, and low probability that you miss out on a lot of money. On average, the bet is a loser.

2) Never leave a multi-day order outstanding. Basically, you're just giving away optionality. If the bottom ever falls out of the market due to some unforeseen event, your bid is just free money to someone else.

3) As a general practice. It's good to use limit orders, if for no other reason than to be clear on what you're paying. if the current market is 87.85/87.90, you can even put in a limit order for 88.00 and you'll get filled at the best level. In this case, probably 87.9 or better. For highly liquid products, it doesn't matter much whether you use a market or limit order, but it's a good habit to get into so that when you run into an illiquid product, you don't pay an unexpectedly high price.

[sheepstache]

Thanks guys!  Just the sort of info I need.

[projekt]

I'm confused. If the market is at 87.90, why not put in a limit buy order for 87.90? There's already an offer at that price. While 0.10c/share isn't much, it seems like a large number of people using a buy-above-market strategy would be putting a lot of money in the hands of brokers.

[brewer12345]

I'm confused. If the market is at 87.90, why not put in a limit buy order for 87.90? There's already an offer at that price. While 0.10c/share isn't much, it seems like a large number of people using a buy-above-market strategy would be putting a lot of money in the hands of brokers.

Search me.  I always use a limit order at the ask price if I really want to buy something.  If the market moves away from you by a few pennies, you just adjust the order and resubmit it.

[Left]

sounds like you want the stop-limit for that.

Say you put the 87.90 as the limit, then you dont mind it moving a few pennies so it will buy up to the stop of 87.95. So you don't have to keep adjusting it.

[KingCoin]

sounds like you want the stop-limit for that.

Say you put the 87.90 as the limit, then you dont mind it moving a few pennies so it will buy up to the stop of 87.95. So you don't have to keep adjusting it.

I don't think this is what you want. In this case, the only way you will get filled is if the stock goes to 87.95 (thus activating the order) and then falls back to 87.9 (thus filling your limit order).

A limit bid of 88.00 means you will get filled at the best level below 88.00. You could put in a limit of 87.9, but if it ticks up to 87.95, you miss it. Then you have to put in another order, at which point is could be at 88.1 or whatever. This is especially true of something that's fairly fast moving. That's why it's easiest to put a limit a little above the current offer (provided that you're largely indifferent to buying at 87.9 or 88.0). You'll probably get filled at 87.9 or better, but you reduce the risk the the market gets away from you. Not a big deal either way, it's just the easiest way to operate IMO.

[dragoncar]

Search me.  I always use a limit order at the ask price if I really want to buy something.  If the market moves away from you by a few pennies, you just adjust the order and resubmit it.

You found your answer.  Playing that game can either save you some pennies, or cost you some pennies (especially if you keep adjusting your order for changing market conditions).  Since I don't know which it will be, I don't play it.

[KingCoin]

I'm confused. If the market is at 87.90, why not put in a limit buy order for 87.90? There's already an offer at that price. While 0.10c/share isn't much, it seems like a large number of people using a buy-above-market strategy would be putting a lot of money in the hands of brokers.

To clarify, you'll get filled at the best level below your limit, not the limit level. The limit level just dictates the highest amount you will pay, so if the offer is still at 87.9 when your 88 limit order goes through, you'll buy at 87.9. You could enter a 200 limit, and you'd still get filled at 87.9.