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Types of Stock Orders


Are you a newbie penny stock trader?

Do you want to enter the exciting and profitable world of penny stock investing but, are just a little too timid and unsure of yourself? Well if you are that’s a good thing it means you’re not stupid. Jumping in guns blazing is a sad and common mistake that most first time investors make. They load up their brokerage account and begin trading stocks that they have just heard of and have not researched thoroughly. Investing requires lots of research and studying of market trends to become truly successful. By visiting our site and signing up for our FREE stock newsletter you are already making the first step towards a profitable investing future as we provide you with our expert analysis and in depth research on every stock we alert to our valued subscribers.  However there is still much to learn regarding investment strategy and trading styles. The goal is to maximize your gains and minimize your losses. This is a must read for all beginning investors.

Types of Stock Orders

Market Orders (MKT)

Market orders are orders to buy or sell a contract at the current best price, whatever that price may be. In an active market, market orders will always get filled but not necessarily at the exact price that the trader thought they would be getting it for. For example, a trader might place a market order when the best price is $.01, but other orders might get filled first, and the trader's order might get filled at $.009.5 instead. Market orders are used when you want your order to be processed immediately, and are willing to risk getting a slightly different price then what you thought it was.

*Note this is not the recommended type of order to use when trading penny stocks I will explain in more detail.

Limit Orders (LMT)

Limit orders are orders to buy or sell a contract at a set price or better. Limit orders may or may not get filled depending upon how the market is moving, but if they do get filled it will always be at the price chosen as the limit, or at a better price if available. For example, if a trader placed a buy limit order with a price of $0.08 the order would only get filled at $0.08 or better, if it gets filled at all. Limit orders are used when you want to buy and sell a stock at a certain price and not risk overpaying or selling at a price that you did not intend to.

This type of order is crucial for the savvy penny stock investor because it truly ensures them of maximizing their gain and minimizing any type of loss they can accrue. Many times anxious investors will see a stock picking up momentum and rush and pay the market price only to see the momentum stop. The price may drop dramatically leaving the investor with a larger loss then they expected. The smart investor will set a limit order at an entry point that they are comfortable with. For example if a stock’s current price is $.05 an investor may set a limit order at $.05 to ensure that they get it for that price and no more.  Now the stock can either go up or down so they may set two additional sell limit orders of $.045 and $.07 this serves as a safety net for the investor. If the stop should drop they can feel safe knowing that they their order will be filled before it reaches a price that will really give their portfolio a hit. The $.07 sell limit ensures that the investor will get at least some type of profit if the stock is bouncing up and down. Also orders can be cancelled at any time before they are filled so if you a stock gaining major momentum you can cancel your sell limit order and set it at a higher price to avoid short selling.

Stop Orders (STP)

Stop orders are similar to market orders, in that they are orders to buy or sell a contract at the best price available but, they are only processed if the market reaches a specific price. For example, if the market price is $1.2567, a trader might place a buy stop order with a price of $1.2572. If the market then trades at $1.2572 or above, the trader's stop order will be processed as a market order, and will then get filled at the current best price. Stop orders are processed as market orders, so if the stop (or trigger) price is reached, the order will always get filled, but not necessarily at the price that the trader intended. Stop orders will trigger if the market trades at or past the stop price, so for a buy order, the stop price must be above the current price and for a sell order, the stop price must be below the current price.

It is important to know how each type of order works before you begin investing. By understanding these basic fundamentals you will save yourself a lot of unnecessary losses in the long run. Remember to sign up for our FREE newsletter to get our alerts sent directly to you before you begin your trading 9:30 am est.

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