Download order - TeacherWeb

Order Types
When trading stocks
Market Order
• When you tell a broker to buy or sell at the
current price
• You don’t specify the price
• The key is speed of execution
• The price you end up paying depends upon how
actively the stock is traded
Stop Order
• This instructs your broker to trade once the stock
has hit a specified target price, called the “stop
price”
▫ Typically used to limit potential losses or protect
profits by selling when the price seems likely to fall
▫ When your stock hits the “stop” price, it becomes a
market order – it executes as soon as possible
Limit Order
• Instructs the broker to buy or sell at a specified
price called the “limit price”
▫ Never becomes a market order – only executes at
the specific price you determined
▫ Risk: Your trade might not be executed at all
Stop-Limit Order
• Instructs the broker to buy or sell when your
stock hits the “stop” price, but not to pay more
or accept less than the “limit price”
▫ Your trade is schedule to occur at a price between
the “stop price” and the “limit price”
▫ Risk: Your trade might not be executed at all
▫ Advantage: Offers you a precise window
Recap - Orders
Buying
Selling
Market Order
Buy at the best
available price
Sell at the best
available price
Limit Order
Buy below or at a
certain price
Sell above or at a
certain price
Stop Order
Buy at a specified
price, which is
currently above the
market price.
Sell at a specified
price, which is currently
below the market price.
Examples:
• Company has a great quarter – you don’t yet
own the stock
▫ Market order – want speed of execution because
you think the price will rise
▫ Advantage: Your order will most likely get filled
▫ Disadvantage: You might pay more than you want
to
Examples:
• Buyer wants to pay $8.00 for a stock, but it is
trading currently at $8.25
▫ Limit order for $8.00 – once the stock hits $8.00,
your order will be filled at exactly the $8.00 price
▫ Advantage: You get the price you want
▫ Disadvantage: You order may never be filled
Examples:
• A stock has traded as high as $10. You only
want to buy when it goes higher than $10.
▫ Enter a stop limit “buy” order at $10.10
▫ Your order will be filled once the stock trade
between $10.00 and $10.10
▫ A stop limit buy order is when you are looking to
buy within a specific window of price
Examples:
• ABC Inc. is trading at $40
▫ Investor has put in a stop-limit order to buy with
the stop price at $45 and the limit price at $46.
▫ If ABC Inc. moves above $45 stop price, the order
is activated and turns into a limit order.
▫ As long as the order can be filled under $46, it will
execute. If the stock trades above $46, the order
will not be filled.
Variations
• Good Till Canceled (GTC)
▫ The order will be filled until you cancel it
• Day Order
▫ The order is only good until the end of the trading
day