As a beginner of stock trading, you will learn about the different kinds of trading orders. By doing so, you can place with your online broker.
There are several things to learn about the different kinds of trading orders you can place online and the circumstances. On the other hand, you also should be careful with the full range of choices you have at your disposal.
Types of Stock Trades
1. Market
Market is the simplest and most common type of stock trade. It indicates that you are willing to take whatever the prices that goes to you when the execution order.
Imagine you want to buy 100 shares of Apple. If the stock is trading at $181 when you place your market order, you shouldn’t be surprised if the price you pay is a bit more or less than that, maybe $181.50 or $180.60.
2. Limit
A limit order allows you to limit either the maximum price you will pay or the minimum price you are willing to accept when buying or selling a stock respectively.
Imagine you want to buy shares of U.S. Bancorp. You believe the stock is overvalued at its current price of $53.48. On the other hand, you don’t want to pay more than $51. So, you place a limit order set to execute at $51 or less. If the stock falls to that price, your order should be executed.
3. Fill-or-Kill (FOK)
A fill-or-kill (FOK) order must be filled immediately in its entirety. Otherwise, the transaction is killed (canceled). It means that FOK orders never partially executes the transaction.
4. Immediate-or-Cancel (IOC)
The key difference between this kind of trade order and the FOK is that this order allows partial amounts of the completed order. When shares are no longer available at the limit or a better price, buying or selling ends immediately and the order is canceled.
5. Stop
In common parlance, stop and stop limit orders are known as “stop loss” orders because day traders and other investors use them to lock in profits from profitable trades. Let’s look at the stop order first.
A stop order automatically converts into a market order when a predetermined price—the stop price—is reached. At that point, the ordinary rules of market orders apply: the order is guaranteed to be executed, but you won’t know the price.