Using short term limit orders instead of market orders

Limit orders are some of the most basic trades available to individual investors at discount trade websites. They have great utility, limiting how much can be spent in buying, and how little can be earned in selling shares of stock. Following is stock trading advice on using short term limit orders instead of market orders.

Using Limit Orders in Stock Trading

Limit orders are some of the most fundamentally important exchanges in investing. They buy at or below set prices, and sell at or above specified values. For instance, if a stock is trading at $5 per share, an investor could set a buy limit order to take on shares with a $4 limit price. The order will only fill if the stock drops, and shares can be taken on for $4 or less when the order is live.

This type of order sells at or above the set price. If a possessed stock trades at $10, an investor could set a sell limit order with the specified price of $11. The order will fill only at or above the limit ($11), if at all.

Market Order in Investing

The market order is a trade that acts as soon as possible. It can be very risky to use this exchange, as a quick price change could result in a bad trade. For instance, in trying to buy shares of stock that was recently trading at $5, a market order might take them in at $6 if the price jumps. It could also sell for less than what is desired per share in unloading stock.

Using Short Term Limit Orders

When quick price fluctuation is a concern, the limit order is much safer to use than the market exchange. For instance, if a stock trades at $5, an investor could set a buy limit with a price at $5.05, if that is the maximum amount per share that the investor is willing to spend. If the stock rises quickly, shares will not be taken on, but a market order would buy regardless of price.

In a sell, if a stock is trading at $10, and an investor wants to unload at $9.90 or better, or else wait to sell later, a short term sell limit order with a specified sell price of $9.90 could be set, and it would trade as soon as possible if the stock did not gap down, but a market order would sell even at a much lower price.

The market order and the limit order are both very basic investing exchanges. The limit trade, however, is much safer, and much less risky, and setting the limit price near the market value can allow for an immediate trade, unless the security’s price moves unfavorably and quickly.

What is Limit Price in Online Stock Trading

Two of the basic types of investing exchanges that users at online discount brokerages like E-Trade, Scottrade, TradeKing, and TD Ameritrade can use have a component called the limit price. This is simply an investing tool that gives traders precision in trading. Following is some information on limit price in online stock trading.

What Is Limit Price in Online Stock Trading

The limit price in a stock trading order is a value at which an investor limits how much can be spent on a buy, and how little can be earned in a sell order. It is part of both the limit order (which only uses this single price to determine when to buy and sell) and the stop-limit order, which is simply a stop-loss trade that uses the limit component to determine how much is too much on a buy, and what is too little in earnings per share in selling stock online. It typically buys below the market, and sells above the market.

Limit Price in the Limit Order in Investing

The limit order uses nothing more than this price. For example, in a buy, if a stock is trading at $5 per share, an investor could set a limit price for a buy order at $4.50, and, if the stock drops, shares will be taken on only at this price or lower. In a sell, the limit price designates what is too little in earnings. Suppose that a trader has shares of a stock, trading at $10 per share. He could set a sell limit exchange with the set price at $11, and, if the security’s value should rise, shares will be unloaded only at that price or better.

Stop-Limit Order in Online Stock Trading

This is another exchange that uses limit price, and, first and foremost, stop price. Stop price is set to cut loss, and it buys rising stock before it gets too high, and sells falling stock before it drops to low. The limit price designates what is too high and what is too low in a buy and sell, respectively.

For example, if a stock, presently trading at $4 is showing upward momentum, a trader could set a buy stop-limit order with a stop price of $5, and a limit price of $5.50. The order will fill once the stop price has been reached only if shares can be bought at or below the limit (at $5.50 or less). In a sell, this order determines when to stop trying to trade falling stock.

Suppose that a trader has shares of a stock, presently trading at $18 per share. She could set a sell stop-limit order with a stop price of $17, and a limit price of $16.50. The shares will only be sold once the stop price has been hit if they can be unloaded at $16.50 or better per share.

The limit price in online stock trading is a valuable part of a couple of key orders. It lets investors determine the maximum possible spending on a buy exchange, and the minimum possible earnings in selling stock.