When investors look to buy or sell stocks, they will usually have a specific order in mind. But some different kinds of orders can be more beneficial depending on what the investor’s goal is. The most common stock orders include the market order and limit order, but knowing about other options can help investors get a better deal.
Table of Contents
Market order
The market order is when an investor wants to buy or sell a particular number of shares at the current market price. If the current market price were $50 per share, someone looking to buy ten shares would pay $500 for one transaction if they used a market order. Using this type of stock trading option means that you’re not waiting around for the price to go up or down.
Market orders are usually executed immediately, while buyers wait for the stock price to drop enough on limit orders before buying. A limit order is when an investor places an order at a specific price they hope will execute once the market reaches that point. If someone wanted to buy ten shares of company XYZ but didn’t want to pay more than $45 per share, they would place a limit order at $45. Once the stock hits $45, they’ll automatically be able to buy their shares at that predetermined amount.
Market orders can give investors more certainty in executing transactions quickly, so it’s suitable for people who want fast action and aren’t waiting around. Alternatively, limited orders might be more beneficial for people who want to pay a certain amount for their stock transactions.
Stop-loss order
Another type of stock order is a stop-loss order, which is a type of limit order that sets an investor’s maximum loss. For example, if an investor has bought shares in company XYZ at $45 per share and wants to wait for them to go up before selling, they could also place a stop-loss order with a price as low as $38 per share (a certain percentage below the current market price). If the stock falls further than $3 per share (the amount the investor wants to risk), their trade will automatically sell those shares and limit their losses.
Stop-loss orders can help investors avoid losing too much money by setting strict stops for their stocks. Investors should be aware that they need to pay a trade fee every time they use a stop-loss order.
GTC order
A type of stock order that isn’t as common is the good till cancelled (GTC) limit order, which stays active until it’s cancelled by the trader or executed. Investors can set up day orders if they don’t want their trades to remain life overnight, so there’s no risk of them losing money due to a fluctuating market during those hours.
Tips for Investing
- Do you want guidance on how to navigate the world of share trading? A financial planner can assist you in developing an investment strategy that is suited to your personal financial situation.
- Make sure your investment portfolio is well-diversified if you’re rethinking it. Mix your assets across several asset classes and market sectors to keep yourself from being overly dependent on a single sector.
Bottom line
Before you begin investing, it’s vital to grasp the terminology of the stock market. No words are more crucial than the ones that describe various sorts of stock orders.
If you want to make a transaction immediately or wait until certain conditions are met, you’ll need to send a different sort of request through your broker. Be sure to analyze each trade separately so you can choose the best order type for it.
