Stock market order types? Successful traders spend the time to get to know the stock market order types; without this knowledge traders have difficulty getting to grips with the market. Poor grip often translates into losses and a poor trading or investing experience. There are basically four types of stock market orders that can be placed: market order; limit order; stop loss; stop limit; trailing stop loss and trailing stop limit.
Stock Market Order Types – Market Order
A market order is an instruction to your broker to buy a set number of shares in a company at the prevailing price, or market price for that stock. They are typically executed within the same day of the order being placed and there are important considerations when placing market orders. One of those considerations is the price of eventual execution. This is not always the same between time of order and actual execution. Because of this caution is always urged. That said, as stock market order types go, the market order is one of the simplest to make and is popular among day traders trading penny stocks.
Stock Market Order Types – Limit Order
Limit orders give day traders more control over the execution process and allows for the s electing of a specific price limit above which a trader will not accept a stock. This price limit then becomes the ceiling for the broker who because of it, cannot buy a stock above that price. The same is true with a limit order for selling a stock. Your broker may not sell your stock below a certain price limit stipulated by you. The one major trouble with limit orders though is that your order may not be executed if the broker cannot find a buyer or a seller at your stipulated price point.
Stock Market Order Types – Stop Loss
Sometimes a day trader trading penny stocks will go into a trade expecting everything to go according to plan. But sometimes things go bad and traders need ways of protecting their gains and minimizing their losses. The order used to contain or limit losses is called a stop loss. A stop loss tells your broker to sell a security at a certain price and not below it so that if a stock begins to decline, a trader can protect himself or herself from sell-offs.
Stock Market Order Types – Stop Limit
A stop limit order is the opposite of a stop loss and lets the day trader of penny stocks take profits at a predetermined price point, thereby guaranteeing a set return. The danger with stop limit orders is that an order could be triggered while the stock continues to climb. So for example a trader buys a stock at 10.00 with a limit of 15.00 but after selling at 15.00 the stock continues to climb, eventually reaching 50.00. Big runs beyond stop limits are not as rare as many penny stocks day traders think so these types of orders should be used carefully and with lots of thought.
There are of course other minor stock market order types but the ones outlined above covers the broad ones available at most online and offline stock brokers. It’s also worth pointing out that many online brokers will only fill certain types of orders for quantity and quality considerations. OTC stocks for instance are not covered by some brokers and the ability to short a stock is taken away by some online brokers. Understanding your aims when trading the best penny stocks is of great importance. Once you understand these aims you can execute using the top four stock market order types.