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Saturday, January 3, 2009

Market-To-Limit (MTL) Order

Market-to-Limit (MTL) Order is an order that is submitted as a Market Order and will be executed at the prevailing best market price. If the order is only partially filled, the remainder of the order will be cancelled, and then will be re-submitted as a Limit Order, with the Limit Price equal to the price at which the filled portion of the order was executed. If the prevailing price never reaches that Limit Price or better again, the remaining of the order will not be executed.

This type of order is trying to combine the advantages of both market & limit order.
MTL order would ensure execution for at least a portion of the order, while at the same time, avoiding the risk of getting filled at the price that is too far away from the last-traded price for the remaining portion of the order.

Example:
Stock ABC is currently traded at $20.05. A trader wants to 500 shares of ABC by submitting a MTL order. Immediately after order submission, 300 shares are filled at $20.08. The remaining of the order (200 shares) will be cancelled and immediately resubmitted as a Limit Order, and the Limit Price will automatically be set at $20.08. If the prevailing market price has moved up and never reaches that Limit Price or better again, the remaining of the order will not be executed.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* FREE Trading Educational Videos You Should NOT Miss
* Getting Started Trading
* Understanding Implied Volatility (IV)
* Option Greeks

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