Types of Orders
Placing orders is an art in itself. Beginners often don't know when to use market orders and limit orders. Different orders are utilized in different market conditions. But the limit order is that the one that is most versatile. Understanding a limit order is important to your trading success. i will be able to only discuss the case for buying, the reasoning and mechanism is that the same for shorting.
Market Order
In a market order, you're basically giving instructions to your broker to buy at the prevailing price. you can't set what price you want to buy. Market orders could be prone to slippage in fast paced markets. for instance , if you provides a market order to buy 10 lots, 3 lots could be filled at $10, another 3 lots at $10.50 and therefore the remaining 4 lots at $11.00. We usually use a order when we need to get in or out of a market fast, like when the market suddenly moves against you drastically.
Limit Order
A limit order is different from a order in that you can specify the price at which you want to buy. for instance , if you specify you would like to buy 2 lots at $10, you'll not get a fill at prices above $10. Hence a possible scenario is you get both 2 lots at $10, or 1 lot each at $10 and $9.50. the sweetness for the limit order is that you will not get a fill unless the price is better than what you specified.
Stop Order
A stop-loss order is better known as a stop loss order . In day trading stop loss is important to your survivor. Some traders don't set a stop loss because they are monitoring their trades real-time. They feel that they will step in fast enough to close the position when the situation goes against them. However, in fast moving markets, you'll very well lose $200 or more on a single contract in a matter of minutes. Setting a stop loss order removes the psychological hesitation to exit an edge . From my experience, this is often an absolute requirement, please master it and use it to your advantage.
Assume you're currently long at $10 and you set the stop loss at $8, you're giving instructions to your broker to sell at market price when the price falls down to $8. When the worth is above $8, the stop loss order lays dormant, it'll turn into a market order only when the price hits $8 to save you from further losses. Note that a stop loss order is usually used to exit a position. Hence if you're long, the stop loss order will give instructions to sell. If you're short, the stop loss order will give instructions to shop for .
Stop Limit Order
A stop limit order is analogous to a stop loss order, except that it'll turn into a limit order at the predetermined price. for instance , assume you're long at $10 and you set a stop limit order to sell at $8, when price falls to $8, the order will become a limit order at $8. Recall that limit order will assure you of a fill better than the worth you specified. Hence, a limit order at $8 means you get a fill at $8 and above.
Stock Market Order Types (Market Order, Limit Order, Stop Loss, Stop Limit)
In this stock market order types tutorial, we discuss the four most common types of orders you need to know to buy and sell stocks: market orders, limit order, stop loss, and stop limit.
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