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.
Read the previous article here.
Types of Stock Trades
6. Stop Limit
In contrast, a stop limit order automatically converts into a limit order when the stop price is at its point. As with other limit orders, your stop limit order may or may not be executed depending upon the price movement of the security.
7. Short Sell Order
Selling short or shorting a stock is a practice that can enable you to profit if you correctly predict that the stock of a price you don’t own will fall.
For instance, General Electric stock is overvalued at a price of $12.50. To try to take advantage of this situation, you can sell borrowed shares of the stock at the price you believe to inflate.
You enter a short sell order for 1,000 shares, borrowing the $12,500 worth of shares. Next, for each $12.50 x 1,000 shares. And then, it sells on the open market and collect the cash.
If the stock price does indeed fall, you can use the next type of order to complete your short sale and make a profit.
8. Day Order
The next two types of orders only give two choices place: day and good-til-canceled. Day orders are in fact just what their name implies. First, they are good only until the end of the regular trading day, at 4 p.m. Eastern time, at which point, they are canceled. Therefore, the position of all market orders are as day orders.
9. Good-Til-Canceled (GTC)
Good-til-canceled (GTC) order remains open until one of three things occurs. First, it is completely filled. Secondly, you cancel the order. Third, a certain time period that’s determined has passed by your online broker.
There are risks in using these orders. Commonly, people spell as till, ’til, or cancelled. The first thing is you may forget you placed the order. Secondly, If you place a large trade with GTC status, you may pay a commission each day your order is partially filled.
If, on the other hand, you fill your order by multiple transactions in a single day, your broker should charge you only a single commission.
10. Trailing Stop
One way to protect gains and limit losses automatically is by placing a trailing stop order. With this kind of order, you set a stop price as either a spread in points or a percentage of current market value.
Take an example, Coca-Cola increases steadily to $62 per share. Now, your trailing stop order has automatically kept pace and will convert to a market order at $59. As the illustration, $62 current market price – $3 trailing stop loss = $59 sale price). Hence, that would provide a gain of $9 per share.