Join the Makers: Using Limit Orders to Reduce Execution Costs
Summary
The article describes joining the makers by placing a limit order at the current bid to buy or at the offer to sell, then waiting for execution. This can suit an investor without immediate time pressure who seeks a better entry or exit price. The investor uses the same kind of resting order as a market maker, but with a different objective: improving execution price rather than earning the bid-offer spread.
It also describes how brokers or algorithmic trading programs may use this approach when executing large institutional orders under VWAP-related price commitments. The example frames a market with a bid and offer and explains that the execution target may depend on urgency and available liquidity. The document gives no measured results or detailed order-management rules. A passive order may wait without filling, and the discussion does not quantify that risk or compare outcomes across market conditions.
Key ideas
- A trader can join the makers by placing a buy limit at the bid or a sell limit at the offer.
- Waiting for a passive order to fill can trade execution speed for a more favorable price.
- Investors and market makers may place similar orders while pursuing different objectives.
- VWAP-oriented execution programs may use maker orders for institutional trades.
- The article gives no quantitative evidence or detailed guidance on fill risk.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.