A market-if-touched or MIT order is an order that becomes a market order when a security reaches a predetermined price. The broker will wait until the price target is met before purchasing the asset when a buy market-if-touched order is used.
When securities reach particular prices, even for a small period, a market-if-touched (MIT) order turns into a market order. Thus, this type of order is conditional. Provided that the securities reach the sell prices that were specified, MIT orders trigger market sell orders.
Although prices are given for the market order's deployment, the order's actual fill price will change depending on the market liquidity. A market order might not fill at the specified price since it takes any price that becomes available once triggered.
How do MIT Orders work?
With MIT orders, you buy and sell securities at specified prices without the need to monitor the market actively. Although stop orders are similar to MIT orders, they have the opposite buy or sell actions. Buy MIT orders, for example, wait for assets' prices to decline, but buy-stop orders are activated when the security's market value rises above a certain level.
Let's say that the price of a share of stock is $12.00. And the analysis of an investor indicates that there will be an undervaluation of the stock at $9 per share. An MIT order at $9.00 per share is available. A market buy order will be sent out and filled at $9.00, the trigger price, if the price drops below that level.
The trigger price of $9.00 or less will cause an MIT buy order to be placed and completed at the best available price, which can be $9, $9.05, $9.10, or even $8.95. Thus, the investor can make investments close to the price that is undervalued without having to monitor the market regularly.
How to Use MIT Orders
MIT orders are intended to generate profit from quick, unexpected price changes. Along with limit or stop orders, MIT orders are perfect for covering any situation in which you could want to purchase or sell a share depending on trigger prices.
Before a short-term trader takes a long position, they wait for prices to reach a key support level. This can be done by placing MIT buy orders at the support level, which will cause a market purchase order to be sent as soon as the price hits the support level.
A long-term investor might be watching for prices to fall to a point where the asset is undervalued. When the price hits that level, they opt to trigger market buy orders by placing MIT orders at that price.
Both strategies are advantageous for people who might not always be available to execute trades or handle several opportunities. Be careful, though, as there is no market order that is not vulnerable to slippage, which is when you receive a different price than anticipated for an order.
