Limit orders are important for the very reason that they PROVIDE liquidity. The IMPACT of a market order on price is directly related to the amount of liquidity being provided for that market order. If there is no limit orders being provided at any given price level and there is a sudden rush of market orders then price will gap until liquidity is found to fill them. If there is a massive amount of limit orders at a given price, price will not move through until the liquidity has been consumed.
Hmmmm so it leads to a lack of liquidity. If you are trading with size and wanting to limit the impact of your orders in the market you simply will not enter market orders if there is not enough liquidity(limit orders) to fill them. So any participant concerned with market impact will not demand liquidity. The result is there is little demand and little supply. Maybe that's what he might have been referring too. I don't think this applies to every participant though. What if your motivation is to MOVE price?
I think it's important too. I've spent a lot of time thinking about the real world implications of order types.
Disliked"A lack of limit orders leads to a lack of liquidity."
DislikedI can't remember who said it or where it was (I want to say capitalist), but my mind is telling me this sentence is of great importance...
Cautiously optimistic. . .