Trading is a confusing affair. It involves risks and often times, the trader’s emotions can get the better of him which might result in a serious trade mistake that will be very difficult to rectify. However, there are some ways that can help you get in and out of a trade without even requiring your attention. There are some commands that you can use, while trading from the online trading system; commands that you can preset to enter and exit a trade based on your specifications.
Here are a few trading terminologies that can save the day for you:
1. Market Order
Market order, also known as the Best Price for a stock, is the value of the stock that helps you determine whether or not you should buy (or sell) the stock.
2. Limit Order
Limit order is the value that you set for a stock, less than (or more than) the trading value of the stock, which you will buy when the price of the stock falls (or increases) to your preset value. For example, if the current trading price of “X” stock is $20, and your limit order is $15, you will buy the stock only when the trading value falls to $15 or lower. So is the case when the limit value is higher than the trading value.
3. Stop Order
Let’s assume you have your eyes on stock “X”. Let’s also assume that the current trading price of X is $50. You want the stock but you are waiting for its price to get a little higher. You can use a Buy Stop Order in this case to get your hands at the stock at your desired price. The same applies for when the value of X goes down from $50. You preset a value, let’s say $45; when the value of X falls down to less than $45, your Sell Stop Order will sell the stock for you.
4. Stop Loss Order
This is the value that you set for a stock to cut down on your loss for the same. You set the value and tell your broker that if the loss reaches the specified value, the trade should be stopped and exited as a loss.
5. Contingency Order
This order will help the broker to buy or sell a stock based on some pre-specified conditions. When you ask your broker to initiate a stop loss order if the trading with the stock goes south, it can be considered as a contingency order.
6. Trailing Stop
This order is given when the trader wants to follow a given security up. Let say, the value of stock X is $20 and you put a trailing stop of $5 lower than the stock, the stop will move up along with the value of the stock. So, if the value of the stock goes up to, say $35, the stop will be at $30. So is the case when the trailing stop is higher than the value of the stock.