|
|
|
 |
|
Given the avalanche of books on trading and investment, how strange that it should be impossible to find one devoting a single chapter to trade execution! Certainly, this area is most important for frequent traders, because good or bad execution can make all the difference in transaction outcomes! Below, you'll find some helpful tips on Execution Skills.
Limit, Market and Stop Orders
To buy or sell a stock, one can enter a few different types of orders to best serve one’s trading goals. The following short description uses orders for 800 shares of YHOO to illustrate some common ordering variants:
- Limit Order-- to buy 800 shares of YHOO at 125: buy 800 shares YHOO at 125 or better (lower price). Sometimes one gets a series of partial trades (partially filled orders) at different prices all equal to 125 or better. If the market price of YHOO moves up before the order can be executed, one may lose the opportunity and never get the trade done.
- Market Order-- to buy 800 shares of YHOO: buy 800 shares of YHOO now at whatever prevailing market price. Usually one gets the stock at the ask price of the moment when the order reaches the exchange. Sometimes, one gets a series of partial trades at (partially filled orders) different prices, with different shares adding up to 800 shares. With such a market order, one always gets 800 shares of YHOO, although there is a risk of getting them at a considerably higher price.
- Limit Order-- to sell YHOO at 125 1/8: sell YHOO at 125 1/8 or better (higher price). Sometimes one may get a series of partial trades (partially filled orders) at different prices all equal to 125, for example, or better. If the market price of YHOO moves down before the order can be executed, it is possible to lose the opportunity and never get the trade done at all.
- Market Order-- to sell YHOO: sell YHOO now at whatever prevailing market price. Usually one will get the stock at the ask price of the moment when the order reaches the exchange. Sometimes, one gets a series of partial trades (partially filled orders) at different prices, the shares of which add up to 800. With such a market order, one can always sell 800 shares of YHOO, although there is a risk of selling them at lower prices.
- Stop Market Order-- to sell 800 YHOO at 122: sell 800 YHOO at the market price if the bid price hits 122.
- Stop Limit Order-- to sell 800 YHOO at 122 stop and 121 1/2 limit: sell 800 YHOO at 121 1/2 or better (higher) price if the bid price hits 122.
- Stop Market Order-- to buy 800 YHOO at 128: buy 800 YHOO at market price if the ask price hits 128.
- Stop Limit Order-- to buy 800 YHOO at 128 stop and 129 1/2 limit: buy 800 YHOO at 129 1/2 or a better (lower) price if the ask price hits 128.
|
Back
