5.5 Types of orders

DIFFERENT ORDER PLACEMENT

An increasing number of investors are now opting to use an internet-based broker for their trading. This often means they must know exactly the type of buy or sell order they want to enter. Let’s explain some of these orders which work whether you are dealing with an internet-based system or a person.

Market Order

A market order is the simplest and quickest way to get your order filled (or completed). It instructs your broker to buy or sell the stock immediately at the prevailing price, whatever the price be. In a volatile market it may change but you will get a closer price.

Limit Order

A limit order instructs your broker to buy or sell stock at a particular price. The purchase or sale will not happen unless you get your price.

Stop Loss Order

A stop loss order gives your broker a price trigger that protects you from a big drop in a stock. You enter a stop loss order at a point below the current market price. If the stock falls to this price point, the stop loss order becomes a market order and your broker sells the stock. If the stock stays level or rises, the stop loss order does nothing. Stop loss orders are like cheap insurance that protects you from incurring a major loss.

Trailing Stop Order

A trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against a loss. If you have a profit in a stock, you can use the trailing stop order to follow it up. You enter the trailing stop order as a percentage of the market price. If the market price declines by that percentage, the trailing stop becomes a market order and your broker sells the stock. If the stock continues to rise, the trailing stop follows it up.

Fill Or Kill Order

Under a fill or kill order, the broker is required to execute the trade at once. Failure to do so results in an un-executed order.

Day Order

A day order is any order that remains pending for the day. If your broker does not fill your order that day, you will have to re-enter it the next day.

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