Some traders that are new to trading can get confused with the amount of different options there are out there. Below we hope to clear this all up and help you understand them more effectively. Once you have created a trading account and have preformed in depth research, now it's time to trade that stock! What type of order will you place?
Market Order If you take a look at the picture below, you will see the word "market" for order type. This trader decided they wanted to place a market order. A market order will usually enter you into the trade right away. What this means is you will buy or sell the stock for whatever the current market price is. If you see a stock with a BID $20.20 and ASK $20.50, a market order will have you buying the stock at that ASK price, and most likely trigger right away. The most important thing to remember is that if you are using a market order, you are buying or selling the stock at the market price and want to enter the trade right away and not wait. If you are trying to sell a stock with a market order, chances are you will be receiving the price you see on the BID. This is because the BID is the price other people are willing to pay for your shares. So below if the trader wanted to buy a stock at the current market price right this minute they would click the buy button and then make sure the order type is "market".
Limit Orders
Now many traders will become familiar with charts and decide they don't want to buy at the current market price. Instead they want to buy the stock only if it hits a certain levels. On the other hand they may want to sell a stock only if it hits a certain level. Instead of using a market order that will buy or sell immediately, they place limit orders that may take some time to initiate!
Buy Limit Order - If you place a buy limit order this means you are placing a order to buy the stock below the current market price. Say a stock is currently trading at $5.00/share and you only want to buy it if it hits $4.95. You would place a Buy limit order for $4.95. This is different from a market order because instead of getting triggered immediately at $5.00/share you are now playing a waiting game only buying the stock if it hits your target price. A buy limit order means you are willing to buy at a certain price or better. Some times you may even get triggered into your buy limit of $4.95 at a lower price which is even better. But unlike market orders, limit orders do not guarantee execution. If the stock never hits your target price, chances are you will not get triggered into the trade.
Sell Limit Order - Now that you have bought your stock, how can you sell it? Well if you place a sell limit order, this means you want to sell the stock above the current market price. Below you can see that your stock is currently trading at $1.40/share. Instead of selling it now, you place a sell limit order at $1.4050. This means you do not want to sell your stock until it reaches the $1.4050 levels or better.
Buy Stop Order - A buy stop order means you are placing an order to buy a stock above the current market price. As you can see below, say a stock is currently trading at $1.40/share. If you wanted to buy the stock only if it hits $1.4050 you would place a buy stop order for $1.4050. What this means is you want to buy the stock but not just yet. You want to wait until it hits a certain price that is above the current price it's trading at.
Sell Stop Order - Say you have bought your stock at a certain price and want to manage your risk. Say you bought a stock at $5.00/share. In a good world, the stock will continue to go up and you won't have to worry about losing. But unfortunately that's not always the case in trading. Sometimes a stock will drop in price and you can lose big if you don't manage risk. This is why people use sell stop orders. If you bought a stock at $5.00/share, say you are only willing to lose .50 cents at most! You would place a sell stop order for $4.50. This way if the stock drops very quick you can limit your losses and sell for $4.50/share. Below is a figure that helps explain that. Once you buy your stock, you can always have a sell stop order in place to manage your risk on the downside. This way if a stock plummets, you can get out much earlier and save on losses.
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