SBI: Market Order

[adamu]

Has anybody used market orders with SBI for US stocks?

I've been trying to buy VT for the past couple of days, but the price keeps rising so my order expired.

I'm thinking of placing a market order and just letting it buy whatever is on offer. Here's their FAQ entry for market orders. It looks like I'll need a 10% surplus + fee to place a market order for VT in a tax-reporting account.

Is there any benefit to placing a market order over just placing a higher limit order? With a limit order is there any chance that I will pay a higher price than the market order or vice-versa? Looking at this Investopedia article, in SBI's case I think the fees are the same so I can't work out any difference between a market order and a higher limit order.

[N00bster]

(not a SBI user, but market and limit order mean the same everywhere)

The market order will have the effect of buying at whatever the price is at the moment. Unless the world stock market suddenly undergoes an unexpected surge between the milliseconds you click and the time your order is matched, there is little chance that you will pay much more than you expect (you may even end up paying less).

A relatively stable asset like VT, which you typically buy and hold (and I assume it is your intention here), is a good candidate for a market order. You said you have been trying to buy it for a few days with limit orders, but could not because your limit price was never matched. You thus had to keep raising your limit price, chasing the market price and eventually ending up paying more when you get lucky after a few days than if you simply placed a market order on day 1.

Limit orders are good for more unstable assets like individual stocks. But if you buy an index for holding, save yourself some time, stress and money and just place a market order.

[adamu]

You thus had to keep raising your limit price, chasing the market price and eventually ending up paying more when you get lucky after a few days than if you simply placed a market order on day 1.

Yep. This is exactly why I'm looking into it.

On SBI a market order requires a 10% surplus, so what I don't understand is what's the difference between placing a market order, and placing a limit order for 10% above the current price? I could even place a limit order for 5% above, have a decent chance of the order being fulfilled and leave less cash lying around than if I'd used a market order.

[RetireJapan]

Either one will buy the stocks as cheaply as possible, so you are right: there is no practical difference between a market order and a limit order 10% above (apart from the amount of typing/clicking, I guess)

[N00bster]

I suppose SBI requires a 10% surplus as a security margin, in case the price jumps up suddently. This has very little chance to happen with VT.

[adamu]

I didn't really want to leave 10% gathering dust, so tried a limit order for 5% above the previous day's closing rate.

The market's just opened and the order was fulfilled a little above the closing rate, but a lot lower than my limit.

Thanks for the advice.

[N00bster]

Isn't the 10% security margin made available again as soon as the transaction has completed? In that case I don't think it would be gathering dust...

[adamu]

Yes, but SBI has a fee structure of 0.486% with a minimum fee of $5.40, so it's uneconomical to buy anything worth less than $1111. In this case the left-over was less than that, so it'll be sitting around until I put enough it to buy another batch of something at the 0.486% rate.

In fact a 5% over-bid was probably overkill. Next time I'll just try a couple of dollars over the market price.

[N00bster]

Andrew Hallam has just published a new article that is spot on for this topic:

https://assetbuilder.com/knowledge-cent ... the-casino

Looks like it agrees with adamu's strategy to use buy limit orders with a price slightly above the market price.