Price
quotes may not be accurate
Prices and trades move so quickly in a fast market,
there can be significant price discrepancies between the
quote you receive one moment and the price at which your
trade is executed the next. Remember, in a fast market
environment, even real-time quotes may be far behind what is
currently happening in the market. In other words, the
"real-time" quote your receiving could very well be
indicative of what the price of the stock was twenty or
thirty minutes before. In addition, the number of shares
available at a certain price (known as the size of a quote)
may change rapidly, affecting the likelihood of a quoted
price being available to you.
Market order execution price may differ from your quote.
During a fast market, orders are submitted to market
makers and specialists at such a rapid pace, there’s likely
to be a backlog that can create significant delays,
sometimes exceeding thirty minutes. As a result, when you
place a market order under these conditions, the quote you
receive is more an indication of what has already happened
in the market than an indication of the trade execution
price you will receive. Market orders are executed on a
first-come, first-serve basis.
In the short time between when your order is placed and
when it’s executed, other trade orders already in line ahead
of yours can affect the stock price. The same applies to
stop orders which are typically placed to secure a profit or
prevent further loss. A stop order becomes a market order as
soon as the stop price is reached, thereby placing it in
line behind all other market orders which have been placed
prior to your order becoming a market order. Stop orders may
not provide any protection at all in a fast market. Finally,
when a stock is trading in a fast market, a market order
cannot be changed or canceled once the stock begins trading.
Delays
in trade executions and/or trade reports.
There may also be delays in trade execution and/or trade
reports due to the sheer volume of trades being processed in
a fast market. To avoid creating duplicate orders, you
should consider these delays and the chance that your trade
order has already been executed but not yet reported, before
placing a change or cancel order. Change or cancel orders do
not expedite trade reports when a stock is trading in a fast
market. In fact, they have the opposite effect by cluttering
the trading systems with more information to process.
Limit
orders can reduce your risk during fast markets.
When you consider placing a trade during a fast market,
placing a limit order will establish the maximum purchase
price you’re willing to pay (in the case of a buy order)
or the minimum price you are willing to receive (in the
case of a sell order). Limit orders in a fast market will
reduce your risk of receiving an unexpected execution
price. What’s more, a limit order allows you to place an
order at the price level you’re most comfortable with when
buying or selling a security. Although a limit order does
not guarantee your order will be executed, placing a limit
order does guarantee that you will not pay a higher price
than you expected.
NOTE:
We believe that these current market conditions are
both exciting and unpredictable. The excitement hails from
new companies, products and services which have sprung up
recently, and are largely due to the success of the
Internet. The unpredictability stems from the volatility
of the stock market and particularly the technology stocks
with their sharp price movements. Though these times may
prove frustrating as well as exciting, we are committed to
providing you with the best service possible and we
endeavor to make your investing experience with Wang
Investments an enjoyable one. We appreciate your business
and ask that you call
us if you have any questions or comments.
