Buying the Dip: Why Limit Orders Beat Market Orders
Across 1,772 stocks with a market cap above 100 billion KRW and solid trading volume, we ran 272,740 simulated trades at random points in time. Which wins, buying with a limit order or a market order? And how much do the stop-loss and take-profit levels actually matter?
00 How this was tested
To keep skill or judgment out of the picture entirely, every stock, date, and time of day was picked at random, and a buy order was placed right there. A limit order was set some percentage below the reference price, and we simply watched whether it filled, then whether the take-profit or the stop-loss was hit first.
- Universe: stocks with a market cap of at least 100 billion KRW and a 5-day average trading value of at least 500 million KRW, on days meeting both conditions
- Exit: whichever of the take-profit or stop-loss is hit first; if neither is hit, the position is closed at that day's close (never held overnight)
- A 0.35% fee was applied on the buy side only
- Korean KOSPI/KOSDAQ markets, using data from July 2025 through July 2026
01 Limit order vs market order
Buy 1% below the reference price, take profit at +1%, stop loss at -1% — limit vs market compared under identical conditions
The first question worth asking: when buying a dip, is it better to haggle with a limit order, or to just buy immediately at market? Both approaches were tested on the exact same stock and the exact same moment in time.
| Order type | Fill rate | Win rate | Avg. return | Avg. win | Avg. loss |
|---|---|---|---|---|---|
| Limit (wait at -1%) | 41.96% | 54.33% | -0.152% | +0.607% | -1.055% |
| Market (instant fill) | 100.00% | 39.16% | -0.371% | +0.572% | -0.977% |
02 Stop-loss, take-profit, or entry price — which matters most?
Starting from the baseline (entry -1%, stop -1%, target +1%), each value was widened one at a time while the other two stayed fixed
Limit orders win — that much is settled. The next question is which of these levers actually moves the outcome. Entry price (-1% → -2%), stop-loss (-1% → -2%), and take-profit (+1% → +2%) were each widened on their own, leaving the other two untouched.
| Combination | Fill rate | Win rate | Avg. return | Profit factor (win-rate weighted) |
|---|---|---|---|---|
| A Baseline (-1% / -1% / +1%) | 41.96% | 54.33% | -0.152% | 0.684 |
| B Wider entry (-2% / -1% / +1%) | 19.25% | 56.96% | -0.135% | 0.723 |
| C Wider stop-loss (-1% / -2% / +1%) | 41.96% | 62.40% | -0.095% | 0.798 |
| D Wider take-profit (-1% / -1% / +2%) | 41.96% | 36.28% | -0.282% | 0.581 |
It's tempting to assume that if the average return is -0.095%, the profit factor should be close to 1.0 too — say, 0.99. But the profit factor here isn't measured against total capital at all. It's the total money the winning trades made, divided by the total money the losing trades lost — nothing to do with account size. Because the two are calculated completely differently, their numbers can diverge a lot more than you'd expect.
Working it out with combination C's real numbers (win rate 62.4%, avg. win +0.607%, avg. loss -1.261%):
| What the winners made | 62.4% × 0.607% | ≈ +0.379pp |
| What the losers lost | 37.6% × 1.261% | ≈ -0.474pp |
| Profit factor (divide: 0.379 ÷ 0.474) | ≈ 0.798 | |
| Average return (subtract: 0.379 − 0.474) | ≈ -0.095% |
0.379% and 0.474% are both small numbers to begin with — well under 1%. When two small numbers like that are divided, the gap looks huge (20%, i.e. 0.798) — but when they're subtracted, the gap shrinks to a mere -0.095 percentage points. "The winners only made 80% of what the losers lost" describes the same losing structure either way, but if you want to know how much was actually lost relative to capital, the average return is the number to look at — the two metrics simply answer different questions.
Setting the entry price lower (B) only reduces how often you get to buy at all (41.96% → 19.25%). Among the trades that did fill, win rate, average return, and profit factor are all close to the baseline (0.684 → 0.723) — a reminder that "how deep a dip you wait for" matters far less than "how much room you give the stop-loss."
03 Takeaways
- Limit orders beat market orders. Even with fully random entries, the simple rule of "only buy when it's cheap" improved the average return by 0.22 points and the win rate by 15 points.
- The stop-loss matters most. Widening it alone improved win rate, average return, and profit factor — all three came out best in this combination (win rate +8.07 points).
- Widening the take-profit backfires. The average win looks bigger, but the win rate collapse (-18.05 points) drags the profit factor down to the lowest of the four (0.581).
- The entry price mainly controls opportunity, not quality. It barely affected the win rate, average return, or profit factor of the trades that actually filled.
- All four combinations still finished with a negative average return. This test set a baseline of "buying with zero judgment, entirely at random" — the next step is to see how much real entry signals (dip patterns, volume, trend filters) improve on that baseline.
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