Stock traders- In this step-by-step beginner stock trading tutorial, part of our guide to online stock trading, you will learn about the trade orders you can place with your online broker.
The 13 Main Types Of Trading Orders
After choosing a broker, you should start trading stocks. Before doing so, you should be clear about the 13 types of trading orders you can place online and the circumstances in which you would use them.
You may not use all of these commands, but you never know. So it’s good to be alert of the full variety of options available to you.
Market Is One Of The Stock Traders
The simplest and most common way to trade stocks is with a market order. Market orders indicate that you are ready to accept the price presented to you when you execute your order.
Imagine you famine to buy 100 stocks of Apple. If the standard is trading at $181 when you place your market order, don’t be surprised if the price you pay is a little more or less, maybe $181.50 or $180.60.
Border Is One Of The Stock Traders
A limit order limits the all-out price you will pay or the minimum price you are willing to receive when buying or selling shares. The main difference between a market order and a limit order is that latter order is fil.
Imagine you want to buy US stocks. Bank corp. You think the stock is overvalue at its current price of $53.48, and you don’t want to pay more than $51, so place a limit order with a fill of $51 or less. If the stock falls to this price, your order is fill.
There Are Three Considerations To Keep In Mind Before Placing A Limit Order:
The stock price can never fall (or rise) to the set limit. As a result, your instruction may never perform.
Limit orders are perform in the order in which they receive. The stock you want to buy (or sell) may reach its limit price but your trade is not execute because the price rose above (or below) your limit before the trade had a chance to complete. This problem is much less common in online trading today than when people called their brokers to place trade orders.
In the event of a unexpect drop in the stock price, your order will be fill at your limit price. For example, imagine the bank CEO unexpectedly resigns or other bad news is report and shares in USA Bancorp fall to $45. If the stock price falls, your order has been fill. You now have a loss of $6 per share.
3. All Or Nothing (AON)
When you buy a large number of shares in a company, the order can take a while to complete, so you may pay different prices for different parts of the order. If you wish to avoid this condition, you can place an all-or-nothing order (AON), which requires shares to be purchased in a single transaction or not at all. However, this also means that if there are not enough shares available for execution, your order may not be fil. Unlike the next two similar types of trade orders, an AON order is valid until you cancel it or until it is execute.
Fill Or Kill (FOK) Is One Of The Stock Traders
A fill-or-kill (FOK) order must fill in full immediately, or it will be remove (canceled). It means that FOK orders can never be partially execute.
Immediate or Cancel (IOC)
The main difference between this type of trade order and the FOK is that this order allows incomplete amounts of the order to be processed. If the shares are no lengthier available at a limited or better price, the purchase or sale will end immediately and the order will be cancel.
Stop, and stop-limit orders are commonly called “stop-loss” orders because day traders use them and other investors to lock in profits from profitable trades. Let’s look at the Stop command first.
A stop order robotically becomes a market order when a predetermined price, the stop price, is reach. At this point, the usual rules for market orders apply: execution of the order is guarante, but you don’t know the price.
On the other hand, a stop limit order will automatically convert to a limit order when the stop price is reach. Therefore, as with other limit orders, your stop-limit order may not be execute depending on the security’s price movement.
Buy To Cover
GE stock did what you predicted and fell to $10.50 per share. Therefore, I would place a buy order to cover the short sale.
Your hedge purchase order would buy back the 1,000 shares for $10,500 and return the borrowed shares to your online broker. Because you bought the shares for $2,000 less than the price you sold them for, you made a profit of $2,000.
Here ARE SOME IMPORTANT RULES FOR SHORT SELLING:
To short sell, you must have margin privileges in your brokerage account. This funds that you can trade with more cash than you have in your explanation.
You must have enough purchasing power in your account to purchase to cover the order in your short sale. For example, if the price of your short shares increases and you don’t have enough money to buy back the shares at the higher price, you will face a margin call, a request from your broker to put more money or securities in your account. To cover the trade.
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