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Market Orders Are for Suckers

Thursday, 28 Jun 2007 | 7:04 PM ET

Some brokers want to rob you blind, and you’re probably handing them your wallet by placing market orders instead of limit orders, Cramer said.



When you place a market order, you end up buying or selling at the asking or bidding price, depending on which end of the deal you’re on. The guy you’re transacting with, with the help of your broker, who won’t spend the extra few minutes needed to find you a deal, will take what he wants.

A brokerage can also pair your order with someone else’s and get both commissions, albeit at a price that will likely disadvantage one of you, Cramer said. And paying a little more or selling for less can sometimes mean the difference between a profit and a loss.

Limit orders keep you in the driver’s seat by allowing you to set your buy or sell price. Cramer doesn’t see any downside for the trader when using limit orders. If diversification is the only free lunch, limit orders are the only free breakfast in the business, he said.

Bottom Line: The best way to stay in the game is to make sure nobody’s taking advantage of you. Use limit orders, and that shouldn’t happen.

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