|How far from the previous day’s market closing price?||Buy order (below the previous day’s closing price)||Sell order (above the previous day’s closing price)|
|0% (at the closing price)||97%||98%|
Notes: This data set only applies to the one security tested, VTI, as a proxy for the whole U.S. stock market and for the time period December 2004 to December 2011 (seven years of daily data).
I adjusted for dividends. I also made an adjustment for the artificially low price on the flash crash day, since that price was not “real.”
I used a period of 60 days for a good-til-cancelled order to get filled.
The percentages listed in the table should be used as a guide to help one decide how to price limit orders, not a firm prediction of future market behavior. Different securities will behave differently. For example, I would expect a bond fund to not fluctuate nearly as much as a stock fund, therefore the chances of having a limit order filled for a bond ETF would likely be sizably lower than what is indicated on this chart. Likewise, a more volatile stock market ETF, such as an emerging markets ETF or an individual stock, would be expected to have a higher probability of having a limit order filled than the probabilities published on this chart. Keep in mind that this chart applies only to a single data set: the entire U.S. market. It also applied during a time when the markets gyrated a fair amount, but did not trend strongly in one direction. As always, past performance does not guarantee future results.
A few other fun facts about this data set:
The average compound annual appreciation over the seven-year period was 2.6%.
The average daily fluctuation (high minus low as a percentage of price) was 1.57%.
What are the chances that a buy limit order placed 1% below the market close will get executed the next day? 29%. A sell order placed 1% above the market close? 27%.