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Stocks
Types of Orders |
It's important to become familiar with
the various types of orders you can place when buying or selling stocks. They're not as
complicated as you might think.
Take a look at the following types of orders:
At the Opening
An order to buy or sell at the best price available when the market opens.
At the close
An order to buy or sell during the last 30 seconds of market activity for the day.
All or None
A limit order to buy or sell where the entire amount of the order has to be executed -- or
none at all.
Day Order
An order that is good only for the trading day received -- terminates automatically when
the market closes and the order hasn't been filled.
Fill-or-Kill
An order that is sent to the marketplace for an immediate execution. If a fill-or-kill
order can't be filled immediately, it is killed (or cancelled) on the spot.
Good 'til Cancelled (GTC)
An order that remains open until cancelled by the investor or executed by the broker. If
the order is not executed during one trading day, it will be carried over to the following
day (or days) until it's executed.
Market Order
The most common type of order executed. Stock is bought or sold at the current market
price -- the best price available at the time the order reaches the market. Market orders
are guaranteed to be filled.
*Remember. The price of the stock may fluctuate in either direction by the time your order
is executed. You may end up paying a higher amount or selling for a lower amount than you
intially anticipated.
Limit Order
Limit orders are executed once a specific price is reached. If you place a limit order to
buy a share of stock for $25, your transaction will be executed if the price of the stock
reaches $25 per share or lower. A limit order to sell would be sold if the stock
reaches $25 or higher. By using a limit order, you set the price -- the market
determines whether your price will be met. You're not guaranteed a buy or a sell.
Stop Order
Stop orders are similar to limit orders with one exception -- the trade is not executed
until the market price reaches the price specified in the order. This type of order
ensures execution but not price. Stop orders are generally used by investors to protect
against a sudden drop in price.
Let's say you bought a stock at $25 per share and it subsequently rose to $40 over the
next few months. You place a stop order to sell at $35 per share -- to protect your
profits. If the stock drops to $35, your order will be executed as a market order.
Stock Calculators:
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• What is my current yield from dividends?
• How much do fees affect my rate of return?
• Which are better: Income or Growth Stocks?
• How do exchange rates affect my foreign
stock? |
