Hit the Bid
Candlefocus EditorAt its core, the goal of hit the bid is to ensure that the investor can sell their position as close to immediately as possible and at the highest possible price.
When placing a hit the bid order, the investor is essentially agreeing to sell the security at the current best bid price. This is the highest price at which a buyer is currently willing to pay for the security on the open market. As the bid price may change over time, and may even fall, the investor is accepting the risk that they won’t be able to get the highest possible price for the security.
It’s important to note that the use of a market order is required when hitting the bid, as this will ensue that the order is filled immediately and that the security is sold as close to the bid price as possible. If a limit order is used, it may never be filled if the current bid price dips below the investor’s chosen limit price.
Hit the bid orders can be beneficial in a variety of different situations, such as when investors need to liquidate a particular security immediately to raise cash. By using a hit the bid order, investors can be sure that the security will be sold immediately to the highest possible bidder, without having to wait for the security to reach the desired limit price.
Instead of placing a hit the bid order, investors may want to consider limit orders or stop-loss orders if they want to ensure that they’ll receive a certain price for the security. However, these alternatives won’t guarantee that the order will be filled immediately as the security needs to reach the specific limit or stop-loss price before the order is executed.
For short-term traders and investors, hit the bid orders can be a great tool to ensure that the order is filled quickly and at the best possible market price. However, it’s important to understand that these orders accept the risk of the market price declining over a certain period of time, which may result in a lower sale price for the security.