In reality, whether limit or market orders work better is ultimately contingent on the behavior of other market participants. And everyone's game has leaks. (Also, notice that if everyone thought one were correct, the other would become correct.)


If everyone didn't have leaks, it would simply be a matter of cycling, where market orders worked only after the pool of people using them had been sufficiently weeded down, and the pool of limiters benefiting had been beefed up at the marketers' expense. In that simple model, the only real error would be your poor timing of the cycle, or of other people's timing of the timing of the evolutionary cycle.


But, as in poker, we know that the stock market is not purely Darwinian because it is not a closed system. The total number of players can rise over time, and there will always be new fish to replace the spent ones. And the existing fish have jobs, so they can resist evolution, and make the same mistakes over and over without dying.


So the question, given that whether limit or market orders work is a result of the stock market not being a closed, zero-sum game, is where does the new money come from. The new money, more often than not, comes from people using limit orders.


You just want to do the oppoiste of what the people making errors are likely to do. People using market orders, with nothing else to go on, are less likley to originate from the group making the most errors.


There will probably always be a hair too many people using limits.


leroy