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Day Trading -Types of Orders
Placing orders correctly is probably one of the most important aspects of trading. It is vital that you understand and use the correct order when you trade.
Stop Loss Order
Probably the most important and most commonly used order. It can be used to establish a new position, limit a loss on an existing position, or protect a profit. A stop order specifies a price at which an order is to be executed. A buy stop is placed above the market and a sell stop is placed below the market. (Which is the opposite of the limit order). Once the stop price is hit, the order becomes a market order and is executed at the best price possible. On a long position, a sell stop is placed below the market to limit a loss. After the market moves higher, the stop can be raised to protect the profit (a trailing stop). You could also use the sell stop to enter the market as the market declines. A buy stop could be placed above the market to initiate a new long position or close an existing short position. Since the stop order becomes a market order, the actual 'fill' price may be beyond the stop price, especially in a fast market.
Stop Limit Order
This order is a combination of both a stop and a limit order. This type of order specifies both a stop price where the trade is activated and a limit price to close the position. Once the stop is elected, the order becomes a limit order. This type of order is useful when the trader wants to buy or sell a breakout, but wants to control the price paid or received.
This order as the name implies will be executed at the opening price of the market. As market openings can tend to be volatile it can be difficult for a broker to get the exact opening price and the settlement price may be different from the opening price.
Market On Close (MOC)
Also as the name implies this order is executed on the close of the market. In some markets the actual closing price may be different from the settlement price particularly if it's a fast moving market.
All Or None
This is essentially a limit order to buy or sell a security. The important point of this order is that the total order must be filled or none of it.
An order that terminated automatically at the end of the day. If you have placed an order to buy or sell a security at a particular price and it is not filled the order is terminated at the end of the day.
The above orders are the most common orders. Some securities may not use all of the above orders, as each market is different. It is important when you first start using orders that you have a chat with your broker and just go over the order procedure with him.
Day Trading -Types of Orders
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