If you are going to place your own orders (and why not?) then an overview of types of orders is fitting and proper.
I am a firm believer in the power of all of you as individuals to make sound investment choices. Mutual funds and fund managers have a mixed bag of results and I promise, having met many of them, these managers are no smarter than you are. Proper financial education is your key to controlling your own financial destiny. And proper education, with an emphasis on options, is what I?m all about.
Which leads to today?s topic: Types of orders. If you are going to place your own orders (and why not?) then an overview of types of orders is fitting and proper.
Stop Loss Order: This is a good safeguard to have as its intent is to stop your loss. Say you buy an asset at 9. You place a stop loss at 8. Meaning that if the price drops to 8 you immediately have placed a sell order to limit your loss to 1. A stop loss can also be used to safeguard a profit. This sort of order is called a?Trailing Stop.??Take our previous example, you buy at 9 with a one point trailing stop. If the price moves to 11 your stop loss order now kicks in if the price drops back to 10. The price goes to 17, your stop order kicks in at 16 and so on. Bear in mind, though, that when a stop loss is triggered it turns into a market order. Meaning that you might not get filled at your stop price
but perhaps much worse. Which is why I prefer the:
Stop Limit Order:??Take our previous example, you buy at 9 with a one point stop limit. Now if the stop is triggered your order becomes a sell order with a limit price of 8. You won?t get filled at a random price. The danger being that if the market really runs away from you your stop loss might not get filled. I still prefer a stop limit as opposed to a pure stop loss.