Limit orders placed inside the spread, and when they actually fill

[Fairman]

Limit orders placed inside the spread, and when they actually fill

A question that comes up a lot from newer scalpers: if the spread is 1.2 pips and I place a buy limit in the middle of it, do I get a better fill?

On a typical retail account, no, not in the way you'd hope. Your buy limit doesn't sit in a queue as a bid that others can sell into. The broker triggers it when the ask price comes down to your limit. So a buy limit placed between the bid and the ask fills only when the ask falls to that level, which also means the bid will be even lower at that moment.

The same works the other way. A sell limit inside the spread fills when the bid rises to it.

So placing limits inside the spread is really just placing them a little closer than the current price. There's no hidden maker rebate on most retail accounts and no improvement over waiting for the move.

Some platforms won't even accept a buy limit above the current bid if it's too close to the ask, because of the minimum distance rules. Others will convert it to a market order straight away.

Where this does matter is if your broker offers a true ECN style account with real order book access. Then your limit can rest as a bid. Very few retail scalpers have that, though, so confirm it with the broker before assuming it.

[Fairman]

The same logic explains a lot of fill confusion. When a buy limit fills and you look at the bid chart, it looks like price never reached your level, because the chart shows bids and your order filled on the ask. This is why people complain that their limit got filled at a price the candle didn't touch, or didn't get filled even though the candle touched it. Turning on the ask line in the chart settings makes these cases much easier to understand at a glance. MT5 calls it Show Ask line and it sits in the chart properties under the Show tab.