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Monday, May 25, 2009

How To Use Different Types of Orders

Think it would be useful for some of you, just keep it here for reference. You can get it out anytime by go to "Order Type" under "Label"

1. Market Order

A market order is an order to buy or sell a stock at the current market price. Unless you specify otherwise, your broker will enter your order as a market order.

2. Limit Orders

To avoid buying or selling a stock at a price higher or lower than you wanted, you need to place a limit order rather than a market order. A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. When you place a market order, you can't control the price at which your order will be filled.

Remember that your limit order may never be executed because the market price may quickly surpass your limit before your order can be filled. But by using a limit order you also protect yourself from buying the stock at too high a price.

3. Stop Order

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is reached, your stop order becomes a market order.

Buy Stop Order — Investors typically use a stop order when buying stock to limit a loss or protect a profit on short sales. The order is entered at a stop price that is always above the current market price.

Sell Stop Order — A sell stop order helps investors to avoid further losses or to protect a profit that exists if a stock price continues to drop. A stop order to sell is always placed below the current market price.

4. Stop-Limit Order

A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at a specified price.

5. Day Orders

Unless you give your broker specific instructions to the contrary, orders to buy or sell a stock are "day orders," meaning they are good only during that trading day.

6. Good-Til-Cancelled Order

Unlike day orders, a good-til-cancelled (GTC) order is an order to buy or sell a security at a specific or limit price that lasts until the order is completed or cancelled. A GTC order will not be executed until the limit price has been reached, regardless of how many days or weeks it might take.

7. One-Cancels-the-Other Order or OCO

An order stipulating that if one part of the order is executed, then the other part is automatically canceled.

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