Having so many different orders types available can be confusing. How would you realize which request is right for you and your specific goals? Well first you ought to learn what all of the orders do.
- Market Order, This Order simply tells the merchant to purchase or sell a stock at whatever price the stock is trading at. This can be beneficial if you simply want to get in and out of a position.
- Limit Order, This tells your merchant only to purchase or sell a security if a certain level is reached. For example if a stock is trading at $30 and you place a limit request to purchase at $25 that means you will not accepting the security except if it goes to $25 or lower. This can be beneficial if you want a stock to break above a certain level before entering it.
- Stop Order, This request transforms into a market request once a stock hits a given price. This can be ideal if you are already in a position and want to set a boundary for the amount you can lose.
- Stop Limit request, this is a request that transforms into a limit request once a target price is hit. This is similar to a stop request aside from the stock does not sell right away if the stop is hit. For this request to be filled it should also meet the conditions of the limit request.
- Contingency Order, This request allows you to purchase or sell a given security based on a given condition.
- Trailing Stop, This is when you want to follow a given security up. For instance you purchase a stock at $50 and put a trailing stop $3 lower than the stock. The stop will climb with the stock. So if the stock goes to $59 the stop will be at $56.
Do not let all of these different types of stock orders you; you can get the hang of them in time. If you are simply starting out in the stock market make sure to keep it simple. Market orders are the easiest way to enter a position. Using a stop can be the easiest way to exit a position. It all descends to your strategy and what you are trying to accomplish.