When you trade stocks, you can use one of the 5 following types of orders:
1. A market order. Market orders are orders to buy stock at whatever price is available. In a fast moving market, these get filled (sold to you) at pretty much the price you expect.
One thing to keep in mind with a market order is the fact that you don't control how much you pay for your stock purchase or sale; the market does. This shortcoming can be met with a limit order.
2. A limit order. Limit orders are orders to buy or sell at a particular price. This is good if you really need to get the price you specify, or if the market is choppy - moving up and down too fast to keep up with, but you don't want to get caught on a sudden change in market direction.
It's important to note that some brokers charge more for limit orders. Why? Simple because no execution means no commission.
3. A stop order. This is an order that says "do not do anything unless this happens...", so on a stop-limit normally you set it to sell your shares if it hits a certain low. In rare cases, people use stop buy orders, but they can be very dangerous. One your criteria is met, your order is executed at the market (no set price).
4. Stop-Limit Order. This is identical to the stop order, except for the fact that a limit order is triggered once your stock reaches a specific target price.
5. A trailing stop order. This is an order that is dependent on the current prices. Usually it is used to lock in profits after some have been made, while letting you ride the trade for even better profits. For example, a trailing stop at 10 below market means if the stop ever drops 10 from its most recent highs, your market order to sell will be activated.
This information is going to come in VERY handy when you're mastering market stock trading, because the order type will determine how profitable you are.
Knowing these order types will be very important as you learn to master trading, since each one has significant benefits in certain market conditions.
To get up to speed on these order types, be sure to practice trading without real money, and get used to trading and seeing which order type performs best in each market condition.
Once you get comfortable with all the order types, and getting your orders entered and filled, and you start to see success, then you can switch over to a cash or margin account and trade for real.
It does not take long before you will be on par with the professional traders, who trade with the precise order type with every trade they make. And remember, these order types work in all markets, including shares, options, commodities and foreign exchange markets.
About the Author:
Powerful online stock trading advice can be yours today. Do not forget to grab these stock trading tips and become a profitable trader today.
0 comments:
Post a Comment