Stock traders can specify a number of conditions when buying and selling stocks. These conditions control two aspects of a transaction: the share price and the transaction timing. Most online trading systems provide the full array of price types and timing options. If you want to apply specific conditions that are not supported by your online trading service, you can give your instructions to a broker, although you may incur an extra fee.
Various forms of stock pricing will allow you to customize your specific trading strategy in order to optimize your outcomes. If specific conditions are unavailable on an online trading service, brokers may be able to fill in the gaps.
Working With Market Orders
An order “at the market” means you will immediately accept the current market price. This price may not be currently displayed, as trades are queued up in order of receipt and thus vulnerable to a price change between placement and execution. Buy orders are filled at the current ask price of sellers; sell orders at the current bid of buyers. If the market is closed when you place a market order, it will be executed as soon as possible once the market reopens. Market orders are guaranteed to execute.
Understanding Limit Orders
You can limit the stock trade price you are willing to accept. Execution is not guaranteed if there is not a counterparty willing to accept your price after your order becomes available for execution. A buy order will be filled at an ask price that is at or below your limit. A sell order will be filled at a bid price equal to or greater than your limit price. You can specify how long you are willing to keep your limit order open.
Defining Stop Orders
These orders are triggered by price movements. A stop order converts to a market order when a specified price is reached. For instance, if your stock is currently at $22 a share and your stop order is set for $20, your shares are guaranteed to sell at the market as soon as the current price reaches $20. A stop limit order is similar, except that it is converted into a limit order when triggered. In the same example, your order would become a limit order at $20, which then becomes the lowest price you will accept. A stop limit order may not execute even if the trigger price is reached if the stock continues falling below your limit.
Trailing Stop Orders
These are similar to stop orders, except the price trigger occurs when prices move a certain number of points or a certain percentage from the current price. If prices rise, your trailing stop price rises with it. For example, a 10-percent trailing stop will become a market order whenever your stock retreats 10 percent from the highest price it reached after you have placed your order. In this way, you can ride a rising stock price and still have downside protection.
More About Order Terms
You can specify whether you limit order needs to be filled immediately, or can be left open either for the rest of the day or until you cancel it. If you require all shares be traded immediately, you can give a fill-or-kill order. If the full share quantity cannot be immediately traded, the order is canceled. If you want full execution but it need not be immediate, you ask for an all-or-none order.