Search for Investing Strategies, Books and Articles
|
 |
|
| |
Wrong Stock Trades Will Lose your Money
Stock Market Orders can be confusing for those not familiar with the lingo and industry language. In this article we attempt to make sense of stock market orders for you using a fictitious public company called 10000 Elephants. We will use specific scenarios that will demonstrate the orders you would need to place with your broker if you wanted to buy or sell 10000 Elephant stock.
Note that the stock market symbol we will use for 10000 Elephants will be ELEP.
Buying Stock
Buying at Market
Scenario – You do not own ELEP but wish to buy it at any price.
Your Action – You place a Market Buy Order with your broker for ELEP.
What will happen – Your broker will purchase ELEP for you at the current market “Ask” price. The Ask price is the price that ELEP sellers want for their ELEP stock.
Buy Limit Order
Scenario – ELEP is currently priced at $100 per share. You want to purchase ELEP, but you believe the $100 per share is too much to pay. You believe that $90 per share is a fair price and you would purchase ELEP if it fell to $90 per share.
Your Action – You place a BUY LIMIT order to purchase ELEP at $90. The Buy Limit order will ensure that the price you pay for the 10000 Elephants stock is no more than $90 per share.
What will Happen – Your broker will accept your order and it will not be executed until ELEP stock falls to $90 or less.
Buy Stop Order
Scenario – ELEP is currently at $100. You believe that if ELEP reaches $110 that it will keep rising. You want to purchase ELEP if it reaches $110 per share.
Your Action – Place a BUY STOP order with your broker to purchase ELEP at $110 per share.
What will Happen – Your broker will accept your order and if ELEP reaches $110 per share your order will be executed at the market “ASK” price.
Selling Stock
Selling at Market
Scenario – You own ELEP and you want to sell your ELEP stock at any price.
Your Action – You place a Market Sell Order with your broker to sell your ELEP.
What will happen – Your broker will sell ELEP for you at the current market “BID” price. The BID price is the price that ELEP buyers want to pay for ELEP stock.
Sell Limit Order
Scenario – ELEP is currently priced at $100 per share. You want to sell ELEP, and you believe the stock will rise to $110 per share. You want to sell ELEP if it rises to $110 per share.
Your Action – You place a SELL LIMIT order to sell ELEP at $110. The Sell Limit order will ensure that the price you sell ELEP for is at least $110 per share.
What will Happen – Your broker will accept your order and it will not be executed until ELEP stock rises to $110 or more.
Sell Stop Order
Scenario – You own ELEP and it is currently at $100. If ELEP falls to $90, you do not want to own it anymore.
Your Action – Place a SELL STOP order with your broker to sell ELEP if the price falls to $90 per share.
What will Happen – Your broker will accept your order and if ELEP falls to $90 per share your order turns into a Market Sell Order and your order will be executed at the market “BID” price.
Visit http://www.10000elephants.com to learn more about trading strategies and to purchase our 10000 Elephants Trading Strategy.
Over 90% of our trades using 10000 Elephants are profitable.
|
 |
|
