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ORDER, BUY AND SELL

USE THESE METHODS TO TRADE IN THE STOCK MARKET

WILLIAM J. LYNOTT

YOU’VE DECIDED to buy or sell a stock. Great! There are many ways to do so and not knowing about them could be costly. Here’s a brief rundown of common orders.

MARKET ORDERS

A market order is the most common. When you tell your broker to buy or sell “at the market,” you are not specifying a price. Your order will be executed immediately at the current price.

MARKET-NOT-HELD ORDERS

Market-not-held orders are similar to market orders, but without the requirement that they be executed as soon as possible. This order allows floor brokers to use discretion if they think that they can get a better price by waiting.

LIMIT ORDERS

For a limit order, you specify the maximum price you are willing to pay or the minimum price you are willing to sell for a security, which could be a stock, bond or option. The order is filled once the price reaches that limit.

Setting limit orders can be tricky. For example, if the company is trading for $26.00, trades down to $24.25 and then rises, your order at $24 will be unfilled.

STOP ORDERS

Stop orders tell your broker to buy or sell a stock once it reaches the price you specify. At that price, the order automatically becomes a market order (see above) to be executed at the next available price.

Stop orders are often used to protect against a loss. For example, you might have a nice gain in a stock currently selling around $40. You could place a stop order to sell if it drops to $32 (a drop of 20%).

STOP-LIMIT ORDERS

Stop-limit orders restrict the orders to the price specified at the time the order is placed. A buy stop-limit order becomes a limit order executable at the limit price (or better) when the security trades at or above the stop price. A sell stop-limit order becomes a limit order executable at the limit price (or better) once the security trades at or below the stop price.

DAY ORDERS

Day orders are good only for the day they are placed. If a day order can’t be filled for any reason, it is automatically canceled.

GOOD-’TIL-CANCELLED ORDERS (GTC)

Normally, GTC orders stay in effect until they are executed by the broker or canceled by the customer. However, some brokers have their own policies; check with your broker to find out his or her policy.

FILL-OR-KILL ORDERS

A fill-or-kill order tells your broker that you want to buy or sell only a specified quantity at a specified price (or better) immediately. If the order can’t be executed for any reason, it is automatically canceled (killed).

YOU CHOOSE

There are many types of orders. Call your broker’s customer service if you need a little help. OM

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult an accountant or tax advisor for advice regarding your particular situation.

DR. LYNOTT is a freelance writer who specializes in business management and personal and business finance. Visit www.blynott.com, or to comment on this article, visit tinyurl.com/OMcomment.