What kinds of trades do you hope to execute? Most advisors suggest you start with simple trades. Options trading, selling stocks short, and other complicated trades require more experience. In some market conditions, execution may be at a price significantly different from the current quoted price. Limit orders will be executed only at a specified price or better. Customers using limit orders receive price protection, but with the possibility the order will not be executed.
If you are investing in initial public offerings, you have to be even more careful. This is particularly true for IPOs that trade at a much higher price than their offering price. Hot stocks are those that have recently traded under fast market conditions where the price changes so quickly that quotes can keep up with the stock price. In these conditions, you risk buying a stock much higher than your original quote. The risk can be reduced by placing a limit order.
A solid understanding of what can happen in a faced paced trading environment can leave you caught unawares. When the market is moving quickly; that is to say, there is a high volume of trades, causing rapid changes in price, there can be delays. These delays can cause a slowdown of the execution and confirmation of trades, which leads to quotes coming more slowly than do the actual changes in price. While web based traders have been led to expect instantaneous quotes and trades, this does not always happen in practice.
While the SEC does not have any regulations which cover how quickly a trade has to be executed, the firms making the trades do have to adhere to their speed of execution published (if they have done so) and to inform investors if significant delays are expected.
The only way to be certain that your buy or sell order will be executed in the price range of your choosing is to use a limit order. Market orders do not have any limits set on prices and can be filled no matter the price of the stock. However, a buy limit order or sell limit order will ensure that the order will only be filled if the price is at or above the price you set (or at or below it, respectively).
Lets take as our example a hot stock " an IPO initially offered at $9; this is a fast moving stock, but you want to pay no more than $20. You can then place a limit order which will only allow the trade to be executed if the price is at or below $20. While you wont end up paying $110 for the stock and taking a loss should the price fall (which it almost certainly will, at least in the short term), it can also mean that your order is never filled at all.
Know your options for placing a trade if you cant access your account online. Most online trading firms offer alternatives for placing trades. Alternatives such as Touch-tone telephone trades, faxes, or talking to a broker over the phone are usually available. Most of the time, these services cost more. Remember that any delays of getting online will probably delay the alternative order methods as well.
If you place an order, never assume anything. Some investors have mistakenly assumed their orders were not executed and placed another. Then they either owned twice as much stock as they wanted. Talk with your firm on handling these situations where you are unsure if your original order was executed.
If you are investing in initial public offerings, you have to be even more careful. This is particularly true for IPOs that trade at a much higher price than their offering price. Hot stocks are those that have recently traded under fast market conditions where the price changes so quickly that quotes can keep up with the stock price. In these conditions, you risk buying a stock much higher than your original quote. The risk can be reduced by placing a limit order.
A solid understanding of what can happen in a faced paced trading environment can leave you caught unawares. When the market is moving quickly; that is to say, there is a high volume of trades, causing rapid changes in price, there can be delays. These delays can cause a slowdown of the execution and confirmation of trades, which leads to quotes coming more slowly than do the actual changes in price. While web based traders have been led to expect instantaneous quotes and trades, this does not always happen in practice.
While the SEC does not have any regulations which cover how quickly a trade has to be executed, the firms making the trades do have to adhere to their speed of execution published (if they have done so) and to inform investors if significant delays are expected.
The only way to be certain that your buy or sell order will be executed in the price range of your choosing is to use a limit order. Market orders do not have any limits set on prices and can be filled no matter the price of the stock. However, a buy limit order or sell limit order will ensure that the order will only be filled if the price is at or above the price you set (or at or below it, respectively).
Lets take as our example a hot stock " an IPO initially offered at $9; this is a fast moving stock, but you want to pay no more than $20. You can then place a limit order which will only allow the trade to be executed if the price is at or below $20. While you wont end up paying $110 for the stock and taking a loss should the price fall (which it almost certainly will, at least in the short term), it can also mean that your order is never filled at all.
Know your options for placing a trade if you cant access your account online. Most online trading firms offer alternatives for placing trades. Alternatives such as Touch-tone telephone trades, faxes, or talking to a broker over the phone are usually available. Most of the time, these services cost more. Remember that any delays of getting online will probably delay the alternative order methods as well.
If you place an order, never assume anything. Some investors have mistakenly assumed their orders were not executed and placed another. Then they either owned twice as much stock as they wanted. Talk with your firm on handling these situations where you are unsure if your original order was executed.
About the Author:
Want to evaluate stocks in a different way? Check out this stock trading robot system or maybe read the stock trading robot review. You'll be amazed!
Posts
No comments:
Post a Comment