How To Use M.I.T. Orders
M.I.T. orders or "Market If Touched" orders are orders that you place behind the market.
By using an MIT order you are saying to your broker that you are waiting for the market to retrace or comeback before you enter an order at a specific price.
Once an MIT order is hit, it turns into a market order.
Here is an example: Let’s assume I am trading the Feb. 09 Lean Hogs contract. The current price of that contract is 63.50. You can place an MIT order at 63.275 to buy one Feb.09 Lean Hogs contract.
As you can see, I’m placing the MIT order "behind" the current price and when it hits my MIT order, that order will turn to a market order.
The same would be true if you are trying to short or position yourself to take advantage of a market moving lower.
Here’s how the order would look like if the price were the same using the example when we bought:
Sell 1 Feb. 09 Lean Hogs @ 64.025 MIT. As you can see, I am placing the order to sell 1 "behind" the current market price.
Advantages of an MIT order:
- better fill prices if the market retraces
- once the order is in, you can walk away from your computer
- allows you to plan your entry ahead of time
- buy/sell on pullbacks
The disadvantages are:
- once hit, the MIT order turns into a market order which may not give you the absolute best fill; slippage in other words.
- not all brokers and exchanges accept M.I.T. orders
- may not get filled at all since the market has to retrace in order for you to get filled
I prefer using a limit order if you need to place orders behind the market, but that’s a personal preference.
An important note when leaving orders overnight. Since these orders are essential market orders when hit, slippage can be huge if you left this trade overnight. I would suggest you always use a "day order" and not a "GTC or Good Till Cancelled" order.
[ratings]
Related posts:
