There are a few tricks that can help your investment portfolio -- orders. They can help make your trades meet your personal requirements and goals. From the basic market order to the trailing stop losses, you need to know what orders can do for you.
The simplest type of order is the market order. This tells your broker that you will take whatever price is presented when your order is executed. Market orders have the lowest commissions and are the easiest to execute.
For example, you are looking at purchasing 100 shares of X. The current market price of X is $53.95. You call your broker and tell him to place a market order for 100 shares of X, ticker symbol XXX. By the time that the order actually executes, the market price may have risen or fallen. You are hoping that it stays the same or goes down in the above example.
A limit order will limit the price you pay or accept when buying or selling. Market orders are always executed; however, the limit order has no guarantee.
For example, you want to buy 100 shares of Y. The current price is $29 per share. You are looking to purchase for no more than $27.50, so you place a limit order at $27.50 or less. If the stock falls, your order will be executed. If it doesn't fall, it won't be executed. Limit orders are executed in the order in which they are received. You also have to be aware that your order will be executed at your limit price. If it falls below that, you will still pay your limit price.
All-or-one orders insure that you are placing your order at a single price at once. This occurs when you do not want the trade executed unless it is in one single transaction. The minimum qualification for an all-or-none order is 300 shares or more. If there are not enough shares available, your order will not be executed. The order will not be executed if you have other orders with special conditions already in place. And they can only be applied in conjunction with a limit order.
Stop and stop limit orders are also commonly referred to as stop loss orders. They are used to lock in the profits from profitable trades. A stop order converts into a market order when the preset price is reached. At that point, the order is guaranteed to be executed, but you don't know what price it will happen at. Just like with a market order.
The stop limit order becomes a limit order once the stop price is reached. You may or may not be able to see your order executed depending on the price of the stock.
Orders are a great way to manage your account through your broker. You set your limits and they are followed. Knowing how to manage your orders is an essential part of investing.
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