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. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches ...
  2. Slippage

    The difference between the expected price of a trade, and the ...
  3. Bracketed Buy Order

    A buy order that is accompanied by a sell limit order above the ...
  4. Order

    An investor's instructions to a broker or brokerage firm to purchase ...
  5. Buy Limit Order

    An order to purchase a security at or below a specified price. ...
  6. Bracketed Sell Order

    A sell order on a short sale that is accompanied (or "bracketed") ...
RELATED FAQS
  1. How do I place a stop loss order?

    Learn how to place a stop-loss order and how traders use stop orders to either limit potential losses or to protect part ... 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 loss order and a limit order?

    Learn how to manage losses and reduce risk in volatile markets while reviewing the differences between stop-loss orders and ... Read Answer >>
  4. What is the difference between a buy limit and a sell stop order?

    Understand the differences between the two order types, a buy limit order and a sell stop order, and the purposes each one ... Read Answer >>
  5. How risky are stop loss orders?

    Understand the purpose and uses of a stop-loss order as a risk management tool for trading and also the risk associated with ... Read Answer >>
  6. What types of investors are best-suited for stop loss orders?

    Use a stop-loss order to mitigate downside risk. Whether you are a conservative beginner or a seasoned day trader, a stop ... Read Answer >>
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