With the growing power of the Internet and digital technology, investors are shifting from hiring advisors to buying stocks by themselves. However, it is only advisable to buy or sell stocks on your own if you know what the different kinds of stock orders are and when they should be used.
This article covers a basic discussion on stock orders and how they complement your investing style. Here are the different types of stock orders:
1. Market order
When a stock is sold or bought without a set price, the transaction is called a market order. In this type of order, the existing market price of the order will be followed, whatever it may be.
Since it is the quickest and easiest way to execute an order, it also offers one of the lowest commissions for stockbrokers.
2. Limit order
A limit order is when a seller or buyer sets a maximum or minimum price to be reached before a transaction is made. This stock order is beneficial for buyers or sellers who wish to complete a transaction using their most preferred price levels.
3. Market-on-opening/closing order
From the name itself, a market-on-opening/closing order can only be established during pre-opening or pre-closing seasons, and its execution happens on the day of opening or closing of the priced order.
4. Market-to-limit order
An order that is made for urgent execution is called a market-to-limit order. This type of order aims to get the chief price for whatever stocks are available.
5. Stop order (stop loss/stop limit)
When a price limit has been reached, then a stop order is immediately triggered. A stop order can fall under these two categories:
- Stop loss order
Once the price limit has been reached, the stock can be marked inactive. With that, it won’t be displayed in the market until a potential trade triggers a target price.
- Stop limit order
In a stop limit order, the stock also becomes inactive and will not be displayed in the market. Instead of only triggering a target price, a potential trader also has to exceed the price limit.
In today’s time of digital technology, people are given various options in creating a passive source of income.
Investing in stocks is one of the most efficient solutions to financial problems, given that you know your way. However, stock investing also carries some risks. Thus, it is important to learn first the different types of stock orders before actively taking part in it.
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