Introduction To Order Types
  1. Introduction To Order Types: Introduction
  2. Introduction To Order Types: Long And Short Trades
  3. Introduction To Order Types: Market Orders
  4. Introduction To Order Types: Limit Orders
  5. Introduction To Order Types: Stop Orders
  6. Introduction To Order Types: Conditional Orders
  7. Introduction To Order Types: Duration

Introduction To Order Types: Introduction

A trade order instructs a broker to enter or exit a position. At first, placing trades may seem overly simple: push the "buy" button when entry conditions are met, and push the "sell" button when it's time to get out. While it is possible to trade in this simplified manner, it is not very efficient, as it requires constant monitoring and it exposes traders to unnecessary financial risks.

Traders who use only the buy and sell buttons may experience losses from slippage and from trading without a protective stop-loss order. Slippage refers to the difference between the price the trader expected and the price at which the trade is actually filled. In fast-moving markets, slippage can be substantial and the difference between a winning and losing trade. Certain order types allow traders to specify exact prices for trades, thereby minimizing the risks associated with slippage.

Protective stop-loss orders
, on the other hand, limit trading losses by creating a "line in the sand" past which traders will not risk any more money. These orders automatically close out losing trades at pre-determined price levels. By utilizing advanced order types, a protective stop-loss order can be placed in the market as soon as a trade is entered. This can be especially important to active traders in a fast-moving market when a stop-loss could be reached within seconds of being filled on an order.

Modern trading platforms allow traders to use a multitude of order types to add precision and protection to their trading methodologies. Knowing when to trade is only part of trading; successful traders must also know how to trade, and which order type is appropriate for a given situation. This introductory guide will explain the various order types - from basic to advanced - and provide examples of how each is used by today's traders.

Introduction To Order Types: Long And Short Trades

  1. Introduction To Order Types: Introduction
  2. Introduction To Order Types: Long And Short Trades
  3. Introduction To Order Types: Market Orders
  4. Introduction To Order Types: Limit Orders
  5. Introduction To Order Types: Stop Orders
  6. Introduction To Order Types: Conditional Orders
  7. Introduction To Order Types: Duration
RELATED TERMS
  1. Order

    An investor's instructions to a broker or brokerage firm to purchase ...
  2. Instructing Bank

    One of the banks that plays a role in a transfer of funds between ...
  3. Executing Broker

    The broker or dealer that finalizes and processes an order on ...
  4. Buy Minus

    A type of order where a client instructs a broker to purchase ...
  5. At The Highest Possible Price

    A type of security trading designation that instructs a brokerage ...
  6. At The Lowest Possible Price

    A type of security trading designation that instructs a brokerage ...
RELATED FAQS
  1. Why can't I enter two sell orders on the same stock?

    To answer this question, let's look at a few different situations. You bought a stock for $10 but want to be able to protect ... Read Answer >>
  2. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  3. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
  4. Why do limit orders cost more than market orders?

    Learn the difference between a market order and a limit order, and why a trader placing a limit order pays higher fees than ... Read Answer >>
  5. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  6. I want to buy a stock at $30, sell when it reaches $35, don't want to hang on to ...

    Once you've identified a security that you want to purchase, you need to determine a price at which you want to sell if the ... Read Answer >>

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