Google and read up about "adverse selection". You are wrong, a retail investor/trader should never (ever) place a limit order. You have negative expectation on those orders, since you are (on the whole), slower and more naive than the other participants in the order book, who are either machines with response times measured in micros or humans who are more devoted to watching the market than you (since it is, after all, their job).
To give an extreme example, let's say you stick a buy order for some equity at the best bid, and a large event happens shortly afterwards (say the employment numbers, the non-farm-payrolls are released). Consider two scenarios. a) Number is good, market takes off, you didn't get filled and you've missed out on profit you could have made had you just crossed the spread. b) Number really bad, everyone else is already out of the market, or fast enough to get out of the market, but your limit order is sitting there like a duck in a shooting gallery, gets filled instantly but the stock tanks well past that level, and you're already showing a loss.
Your expectation on a limit order is negative. It is more likely to get filled when you don't want it to get filled - this is adverse selection. Unless you really do have the tools to compete.
Even this assumes that you are directly accessing the market, it is even worse if you go through a broker. They get up to all sorts of shenanigans, including what they call "price improvement", where they'll jump in front of your limit order by some tiny increment.
To give an extreme example, let's say you stick a buy order for some equity at the best bid, and a large event happens shortly afterwards (say the employment numbers, the non-farm-payrolls are released). Consider two scenarios. a) Number is good, market takes off, you didn't get filled and you've missed out on profit you could have made had you just crossed the spread. b) Number really bad, everyone else is already out of the market, or fast enough to get out of the market, but your limit order is sitting there like a duck in a shooting gallery, gets filled instantly but the stock tanks well past that level, and you're already showing a loss.
Your expectation on a limit order is negative. It is more likely to get filled when you don't want it to get filled - this is adverse selection. Unless you really do have the tools to compete.
Even this assumes that you are directly accessing the market, it is even worse if you go through a broker. They get up to all sorts of shenanigans, including what they call "price improvement", where they'll jump in front of your limit order by some tiny increment.