Home Trading Strategies What Are The Different Stock Order Types

What Are The Different Stock Order Types

What Are The Different Stock Order Types

now moving on let’s talk about the different types of orders okay so when you are trading stocks there are different types of orders that you can use in the market and I just want to share with you some of the most common ones there is no more to this forward and about I’m about to share with you okay but I’m not gonna cover all of them because it’s just a it’s just too extensive but these are the four most popular most common ones that I feel that you should know they are the market order limit other stop order and stop-loss order so let me explain market order what is it right so market order is simply an order right that sends to the market right now immediately right whatever the prevailing ask price is you will buy right now so that’s what we call a market order it means that you want to enter the trade right now so you use a market order so the good thing about market order is that you know for sure that you’ll be in the tree okay guaranteed right you just hit the market order the the broker right would send the order to the exchange and get for you the best possible price so you know for sure you will be in the trade the downside to it is that you have to pay a premium okay because you are willing to you know pay whatever the current prevailing price is so if the stock is moving pretty fast okay you might have to pay a slightly higher price a premium right at whatever the asking price is currently yes so this is the market order mix is what we call the limit order so limit other is a where you will only get feel on the trade if the price comes to your desired level so let’s say for example again Apple shares all right let’s say the current price of Apple is trading at one hundred and ten dollars and let’s say you know you’d want to be hitting a market order because you have to pay a hundred and ten dollars so instead what you want to do is what you could do is place a buy limit order a hundred dollars so what happens is that if if right the price of Apple it declines right to $100 then that buy limit order will get you fill and Apple shares I mean to buy a bull shares at $100 so this is what we mean by a limit order you only enter that if the market comes to your desired price level so this is good for those of you who know who trick boobs pullback right let me know there is a useful function that you can use so the process Daniel you enter at a cheaper price because you don’t have to pay the the prevailing market price you can actually wait for the market to come to a more cheaper price level before you enter the trade the downside to it is that you might miss the move because what if Apple right now is trading at hundred and ten dollars and you have a buy limit at hundred dollars but Apple doesn’t you know decline it moves to 120 130 150 200 500 and you end up missing the move right because you want to enter at a cheaper price so that’s the downside the first downside the second downside is that you are you know trading against the current momentum so what this means is that let’s say you know Apple price is set here I know okay let’s say this is again one hundred and ten dollars and you have an order over here at this $100 level so what you’re actually doing is that you’re buying Apple or is the current momentum is against you it’s against you it’s not necessarily anything bad but this is something that again I just want you to know that if you is that you will be entering your trade right when the current momentum is against you okay so that’s so-called a couple of you know cons that you might want to be aware of so that is the limit order the third thing is what we call a stop order so a stop order is useful right when you want to trade break up because you will only enter trace as the market moves in your favor so for example okay let’s say that Apple shares has been in range okay let’s say the height of the range is $100 and the lows is let’s say $80 so if you use a stop order right you can put in a stop order and let’s say 105 dollars right over here 105 dollars this means our is dead this means our there only if Apple shares move up and hits a hundred and five dollars only then will you buy the shares so this is what we call a buy stop buy stop order you only go along right if the share price moves in your favor right and it hits a predetermined level that you you expect okay so if you have a buy stop order 105 you will only buy the shares if Apple reaches 105 if you reach 100 100 and 200 and 304 you will not buy the shares he only buys right when it hits a hundred and five dollars right so this is what we mean by a buy stop order so the paroles is that when you are using a stop order a buy stop order for example you are entering your traits with momentum so you can see that this is actually the opposite right of the limit order so when you buy a breakout right let’s say you have a buy order over here you’re buying right as momentum momentum right it’s in your favor the downside to trading with a stop order is that it might be a false breakout so what is a false breakout so the stock price might you know go up go down go up good eye breaks out and it collapse back into the range so you end up you know buying and the highs over here so this could happen right so again I just wanted you know I want you to be aware of it okay so this is the stop order and finally it’s something what we call the stop-loss order possibly the most important order that you use so stop-loss order is unlike the earlier three orders where it gets you into the tree a stoploss order gets you out of the tree okay you exit the trade if the price goes against you so you can think of this like a defense mechanism right if the stock price goes against you after you hit a certain price level you’re out of the trade so again an example let’s say you buy a you buy Apple share set at this point or maybe is a hundred bucks and you have a stop loss order at let’s say $70 so what this means is that if Apple shares it declines right to $70 at this point you will automatically sell Apple shares because your stop-loss is at $70 right so this is a an order right that helps you so called protects your trading account it prevents you from you know getting things out of hand okay it’s a defense mechanism so the process is that you know you cut your losses you get to live another day you don’t have to know lose a huge chunk of capital because your stop-loss no prevents further damage but a cons of it is that you know the market could reverse back in your favor so you know let’s say again market you know goes up okay you buy over here your stop-loss is your market comes down hit your stop-loss and then continues higher so wainy he just stopped loss right it could reverse back in your direction so you can see that you know man if I didn’t use a stop-loss right I wouldn’t have taken a lot so that this definitely is gonna hit your mind right but trust me right in the long run it’s for you it’s for your own good because what if what if right the stock prices just collapse lower and never recovers so again stop-loss as I’ve said right it’s a defense mechanism it’s not 100% foolproof there will be times where the market hit just stop loss and any moves back in your favor and that’s simply the cost of trading the cost of doing business okay so a stop loss order is unique in the sense that it’s an order that gets you out of the tree so a recap number one we talked about market order it gets you into the tree it gets you into the market right now you simply buy whatever the asking price is a limit order is order that gets you at a cheaper price you set a determine a price level that you want to enter and the market declines to that level you enter the trade that’s a limit order a stop order is the opposite of a limit order you only enter the trade if the market moves enough in your favor a whatever price level that you determine right so a stop order is basically trying to buy a break out if the price have moved so much distance within this period of time your stop order will get you into the tree and finally we talked about stop-loss order is simply an order it gets you out of the trade to protect you and your trading account all right you


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