What happens when there are no Limit Orders?
The obvious thing would happen. 10 shares change owner at the price of $100. A partially still open selling order would remain. Market orders without limits means to buy or sell at the best possible or current price. However, this is not very realistic. Usually there is a spread between the bid and the ask price and the reason is that market makers are acting in between. They would immediately exploit this situation, for example, by placing appropriately limited orders. Orders without limits are not advisable for stocks with low trading activity. Would you buy or sell stuff without caring for the price?
"Legally speaking, if you do close a limited company, the funds belong to the government (""bona vacantia""). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s   bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will   belong to the Crown. The company’s bank account will be frozen and any   credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will   be 'bona vacantia'. Bona vacantia literally means “vacant goods” and   is the technical name for property that passes to the Crown because it   does not have a legal owner. The company’s bank account will be frozen   and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order,   unless a company is administratively restored to the register (see   chapter 4).  Anyone who intends to make an application to the court to   restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it   appeared to be no longer carrying on business or in operation, a   former director or member may apply to the registrar to have the   company restored. [...]" A stop-loss order becomes a market order when a trade has occurred at or below the trigger price you set when creating the order. This means that you could possibly end up selling some or all of your position at a price lower than your trigger price. For relatively illiquid securities your order may be split into transactions with several buyers at different prices and you could see a significant drop in price between the first part of the order and the last few shares. To mitigate this, brokers also offer a stop-limit order, where you set not only a trigger price, but also a minimum price that you are will to accept for your shares. This reduces the risk of selling at rock bottom prices, especially if you are selling a very large position. However, in the case of a flash crash where other sellers are driving the price below your limit, that part of your order may never execute and you could end up being stuck with a whole lot of shares that are worth less than both your stop loss trigger and limit price. For securities that are liquid and not very volatile, either option is a pretty safe way to cut your losses. For securities that are illiquid and/or very volatile a stop-limit order will prevent you from cashing out at bottom dollar and giving away a bargain to lurkers hanging out at the bottom of the market, but you may end up stuck with shares you don't want for longer than originally planned. It's up to you to decide which kind of risk you prefer. In general, how does a large open market stock sale affect prices? A very general answer, all other things being equal, the price will move down. However there is nothing general. It depends on total number of shares in market and total turn over for that specific shares. The order book for the day etc. What is the maximum percentage of a company you could sell per day before the trading freezes, and what factors matter? Every stock exchange has rules that would determine when a particular stock would be suspended from trading, generally a 10-20% swing [either ways]. Generally highly liquid stock or stock during initial listing are exempt from such limits as they are left to arrive the market price ...  A large sell order may or may not swing the price for it to get suspended. At times even a small order may do ... again it is specific to a particular stock. "Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a commission on every trade regardless of profit, so every trade you make that you make at a loss also costs you commissions. Even if you make trades that are profitable more often than not, if you make quite a few trades with small amounts like this, your commissions may eat away all of your profits. Commissions represent a fixed cost, so their effect on your gains decreases proportionally with the amount of money you place at risk in each trade. Since you're in the US, you're required to follow the SEC rules on pattern day trading. From that link, ""FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period."" If you trip this rule, you'll be required to maintain $25,000 in a margin brokerage account. If you can't maintain the balance, your account will be locked. Don't forget about capital gains taxes. Since you're holding these securities for less than a year, your gains will be taxed at your ordinary income tax rates. You can deduct your capital losses too (assuming you don't repurchase the same security within 30 days, because in that case, the wash sale rule prevents you from deducting the loss), but it's important to think about gains and losses in real terms, not nominal terms. The story is different if you make these trades in a tax-sheltered account like an IRA, but the other problems still apply. You're implicitly assuming that the stock's prices are skewed in the positive direction. Remember that you have limit orders placed at the upper and lower bounds of the range, so if the stock price decreases before it increases, your limit order at the lower bound will be triggered and you'll trade at a loss. If you're hoping to make a profit through buying low and selling high, you want a stock that hits its upper bound before hitting the lower bound the majority of the time. Unless you have data analysis (not just your intuition or a pattern you've talked yourself into from looking at a chart) to back this up, you're essentially gambling that more often than not, the stock price will increase before it decreases. It's dangerous to use any strategy that you haven't backtested extensively. Find several months or years of historical data, either intra-day or daily data, depending on the time frame you're using to trade, and simulate your strategy exactly. This helps you determine the potential profitability of your strategy, and it also forces you to decide on a plan for precisely when you want to invest. Do you invest as soon as the stock trades in a range (which algorithms can determine far better than intuition)? It also helps you figure out how to manage your risk and how much loss you're willing to accept. For risk management, using limit orders is a start, but see my point above about positively skewed prices. Limit orders aren't enough. In general, if an active investment strategy seems like a ""no-brainer"" or too good to be true, it's probably not viable. In general, as a retail investor, it's foolish to assume that no one else has thought of your simple active strategy to make easy money. I can promise you that someone has thought of it. Trading firms have quantitative researchers that are paid to think of and implement trading strategies all the time.  If it's viable at any scale, they'll probably already have utilized it and arbitraged away the potential for small traders to make significant gains. Trust me, you're not the first person who thought of using limit orders to make ""easy money"" off volatile stocks. The fact that you're asking here and doing research before implementing this strategy, however, means that you're on the right track. It's always wise to research a strategy extensively before deploying it in the wild. To answer the question in your title, since it could be interpreted a little differently than the body of the question: No, there's nothing wrong with investing in volatile stocks, indexes, etc. I certainly do, and I'm sure many others on this site do as well. It's not the investing that gets you into trouble and costs you a lot of money; it's the rapid buying and selling and attempting to time the market that proves costly, which is what you're doing when you implicitly bet that the distribution of the stock's prices is positively skewed. To address the commission fee problem, assuming a fee of $8 per trade ... and a minimum of $100 profit per sale Commissions aren't your only problem, and counting on $100 profit per sale is a significant assumption. Look at point #4 above. Through your use of limit orders, you're making the implicit assumption that, more often than not, the price will trigger your upper limit order before your lower limit order. Here's a simple example; let's assume you have limit orders placed at +2 and -2 of your purchase price, and that triggering the limit order at +2 earns you $100 profit, while triggering the limit order at -2 incurs a loss of $100. Assume your commission is $5 on each trade.  If your upper limit order is triggered, you earn a profit of 100 - 10 = 90, then set up the same set of limit orders again. If your lower limit order is triggered this time, you incur a loss of 100 + 10 = 110, so your net gain is 90 - 110 = -20. This is a perfect example of why, when taking into account transaction costs, even strategies that at first glance seem profitable mathematically can actually fail.  If you set up the same situation again and incur a loss again (100 + 10 = 110), you're now down -20 - 110 = -130. To make a profit, you need to make two profitable trades, without incurring further losses.  This is why point #4 is so important. Whenever you trade, it's critical to completely understand the risk you're taking and the bet you're actually making, not just the bet you think you're making. Also, according to my ""algorithm"" a sale only takes place once the stock rises by 1 or 2 points; otherwise the stock is held until it does. Does this mean you've removed the lower limit order? If yes, then you expose yourself to downside risk. What if the stock has traded within a range, then suddenly starts declining because of bad earnings reports or systemic risks (to name a few)? If you haven't removed the lower limit order, then point #4 still stands.  However, I never specified that the trades have to be done within the same day.  Let the investor open up 5 brokerage accounts at 5 different firms (for safeguarding against being labeled a ""Pattern Day Trader""). Each account may only hold 1 security at any time, for the span of 1 business week. How do you control how long the security is held? You're using limit orders, which will be triggered when the stock price hits a certain level, regardless of when that happens. Maybe that will happen within a week, or maybe it will happen within the same day. Once again, the bet you're actually making is different from the bet you think you're making. Can you provide some algorithms or methods that do work for generating some extra cash on the side, aside from purchasing S&P 500 type index funds and waiting? When I purchase index funds, it's not to generate extra liquid cash on the side. I don't invest nearly enough to be able to purchase an index fund and earn substantial dividends. I don't want to get into any specific strategies because I'm not in the business of making investment recommendations, and I don't want to start. Furthermore, I don't think explicit investment recommendations are welcome here (unless it's describing why something is a bad idea), and I agree with that policy. I will make a couple of points, however. Understand your goals. Are you investing for retirement or a shorter horizon, e.g. some side income? You seem to know this already, but I include it for future readers.  If a strategy seems too good to be true, it probably is. Educate yourself before designing a strategy. Research fundamental analysis, different types of orders (e.g., so you fully understand that you don't have control over when limit orders are executed), different sectors of the market if that's where your interests lie, etc. Personally, I find some sectors fascinating, so researching them thoroughly allows me to make informed investment decisions as well as learn about something that interests me. Understand your limits. How much money are you willing to risk and possibly lose? Do you have a risk management strategy in place to prevent unexpected losses? What are the costs of the risk management itself? Backtest, backtest, backtest. Ideally your backtesting and simulating should be identical to actual market conditions and incorporate all transaction costs and a wide range of historical data. Get other opinions. Evaluate those opinions with the same critical eye as I and others have evaluated your proposed strategy." At any point of time, buyer wants to purchase a stock at lesser price and seller wants to sell the stock at a higher price.  Let's consider this scenario  Company XYZ is trading at 100$, as stated above buyer wants to purchase at lower price and seller at higher price, this information will be available in Market depth, let's consider there are 5 buyers and 5 sellers, below are the details of their orders Buyers List Sellers List Highest order in buyers list will contain the bid price and bid quantity, Lowest order in Sellers list will contain the offer price and offer quantity. Now, if I want to buy 50 Stocks of company XYZ, need to place an order first, it can be either limit or Market. Limit Order : In this order, I will mention the price(buy price) at which I wish to buy, if there is any seller selling the stock less than or equal to price I have mentioned, then the order will be executed else it will be added to buyers list Market Order : In this order, I will not mention the price, if I wish to purchase 50 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 101. if I wish to purchase 200 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 2 transactions, since entire request cannot be accommodated in single order Usually the volume(Ask Volume and Offer Volume) being displayed are all Limit orders and not Market orders, Market orders are executed immediately. This is just an example, However several transactions are executed within a second, hence we will get to know the exact value only after the order is completed(executed) Your order may or may not be executed.  The price of stock can open anywhere.  Often yesterday's close is a good indication of today's open, but with a big event overnight, the open may be somewhere quite different.  You'll have to wait and see like the rest of us.  Also, even if it doesn't execute at the open, the price could vary during the day and it might execute later. "I've alway thought that it was strange, but the ""price"" that gets quoted on a stock exchange is just the price of the last transaction. The irony of this definition of price is that there may not actually be any more shares available on the market at that price. It's also strange to me that the price isn't adjusted at all for the size of the transaction. A transaction of just 1 share will post a new price even if just seconds earlier 100,000 shares traded for a different price. (Ok, unrealistic example, but you get my point.) I've always believed this is an odd way to describe the price. Anyway, my diatribe here is supposed to illustrate the point that the fluctuations you see in price don't really reflect changing valuations by the stock-owning public. Each post in the exchange maintains a book of orders, with unmatched buy orders on one side and unmatched sell orders on the other side. If you go to your broker and tell him, ""fill my order for 50,000 shares at market price"", then the broker won't fill you 50,000 shares at .20. Instead, he'll buy the 50 @ .22, then 80 @ .23, then 100 @ .30, etc. Because your order is so large compared to the unmatched orders, your market order will get matched a bunch of the unmatched orders on the sell side, and each match will notch the posted price up a bit. If instead you asked the broker, ""open a limit order to buy 50000 shares at .20"", then the exchange will add your order to the book: In this case, your order likely won't get filled at all, since nobody at the moment wants to sell at .20 and historically speaking it's unlikely that such a seller will suddenly appear. Filling large orders is actually a common problem for institutional investors: http://www.businessweek.com/magazine/content/05_16/b3929113_mz020.htm http://www.cis.upenn.edu/~mkearns/papers/vwap.pdf (Written by a professor I had in school!)" "Your question contains a faulty assumption: During crashes and corrections the amount of sellers is of course higher than the amount of buyers, making it difficult to sell stocks. This simply isn't true.  Every trade has two sides; thus, by definition, for every seller there is buyer and vice versa.  Even if we broaden the definition of ""buyers"" and ""sellers"" to mean ""people willing to buy (or sell) at some price"", the assumption still isn't true.  When a stock is falling it is generally not because potential buyers are exiting the market; it is because they are revising the prices they are willing to buy at downward.   For example, say there are a bunch of orders to buy Frobnitz Consolidated (DUMB) at $5. Suppose DUMB announces a downward revision to its earnings guidance. Those people might not be willing to buy at $50 anymore, so they'll probably cancel their $50 buy orders.  However, just because DUMB isn't worth as much as they thought it was, that doesn't mean it's completely worthless.  So, those prospective buyers will likely enter new orders at some lower value, say, $45.  With that, the value of DUMB has just dropped by $5, a 10% correction.  However, there are still plenty of buyers, and you can still sell your DUMB holdings, if you're willing to take $45 for them. In other words, the value of a security is not determined by the relative numbers of buyers and sellers.  It is determined by the prices those buyers and sellers are willing to pay to buy or accept to sell.  Except for cases of massive IT disruptions, such as we saw in the ""flash crash"", there is always somebody willing to buy or sell at some price."