medium · Market Microstructure adverse-selection

An uninformed trader consistently uses limit orders. Which scenario correctly describes the 'adverse selection' problem they face when their order fills?

1. Their buy limit order fills only when an informed seller knows the stock's fundamental value has dropped below the limit price.
2. The exchange's matching engine gives their resting order priority simply because they are an uninformed retail trader.
3. Their buy limit order fills at a price noticeably better than the market midpoint, which hands them instant, riskless alpha.
4. They pay the full quoted bid-ask spread on every fill to guarantee immediate execution, even during quiet, low-volatility markets.

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