Maybe you want to make it big as an investor. Maybe you just want a nest egg for retirement or financial security for your family. Whatever the reasons, thousands of Americans everyday make their first steps to becoming active investors.
Before hitting the market though, there’s a lot would-be investors need to know; like understanding the different types of stock and securities investments, and how active an investment approach you’d like to take.
Once you’ve got that down, you’ve got to know the buy-and-sell process of trading. For that, you’ve got to know your order types.
While order types might vary in availability from firm to firm and among individual brokers, there are some common order types that everyone should know. That’s why the SEC has published an investor bulletin outlining common buy-and-sell order types that you should be aware of before you start investing.
Common Buy-and-Sell Order Types
Market orders are orders to buy or sell a stock at the best available price, i.e. market price. While market orders are typically executed immediately, it’s important to know that the price something last traded at is not necessarily the price you will get.
A limit order requires that a stock be bought or sold at a specific price or better.
- Buy limit orders can only be executed if the order is at limit price or lower
- Sell limit orders can only be executed if the order is at limit price or higher
It’s important to note that limit order may not always be executed. They depend on the market price reaching the set limit price.
Stop orders, also called stop-loss orders are orders to buy or sell when a stock reaches a specified value. When that value is reached, the order then acts as a regular market order.
- Buy stop orders are entered at prices above current market prices
- Sell stop orders are entered at prices below current market prices
These represent only the three most common order types available. You can also combine order types to further suit your investing needs. To learn more about different order types and more on these common order types, read the full SEC bulletin.
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