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.
This kind of price fluctuation is especially common in very hot stocks such as IPOs. Initial public offerings commonly have rapid changes in price due to the very high volume of trading for a new offering. There are delays in quotes, since the trading is simply happening too fast for quotes to keep pace in real time. This has led many novice investors to pay a lot more than they had anticipated for a stock; this is why a limit order can be a very good thing, especially if you are new to the stock market.
You must understand the fast market environment to comprehend what can happen if you have not taken precautions. In fast markets, when lots of investors are trading and prices change quickly, delays can develop across the board. Executions and confirmations slow down, while price quotes lag behind actual prices. Online investors expect instant access to their accounts and instantaneous executions of their trades. In a fast-moving market, this is not possible.
There are no SEC regulations that require a trade to be executed within a set period of time. However, if firms advertise their speed of execution, they must not exaggerate or fail to inform their investors about the possibility of significant delays.
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).
Suppose youre interested in a fast moving IPO which was $9 at the initial offer. However, you dont want to pay above $20; in this case you would place a limit order to buy at or below this price. This will protect you from buying this stock at $75 and losing out when it drops. Keep in mind that if the market moves more quickly than your limit order can be filled, your trade may not be executed 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.
When it comes to your stock trades, never assume anything. A lot of traders have ended up buying twice as much stock as they wanted to after thinking an order had not been executed and placing a second one. Speak with your firm and ask them how you can confirm that your order has been executed so that you dont end up making this mistake.
This kind of price fluctuation is especially common in very hot stocks such as IPOs. Initial public offerings commonly have rapid changes in price due to the very high volume of trading for a new offering. There are delays in quotes, since the trading is simply happening too fast for quotes to keep pace in real time. This has led many novice investors to pay a lot more than they had anticipated for a stock; this is why a limit order can be a very good thing, especially if you are new to the stock market.
You must understand the fast market environment to comprehend what can happen if you have not taken precautions. In fast markets, when lots of investors are trading and prices change quickly, delays can develop across the board. Executions and confirmations slow down, while price quotes lag behind actual prices. Online investors expect instant access to their accounts and instantaneous executions of their trades. In a fast-moving market, this is not possible.
There are no SEC regulations that require a trade to be executed within a set period of time. However, if firms advertise their speed of execution, they must not exaggerate or fail to inform their investors about the possibility of significant delays.
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).
Suppose youre interested in a fast moving IPO which was $9 at the initial offer. However, you dont want to pay above $20; in this case you would place a limit order to buy at or below this price. This will protect you from buying this stock at $75 and losing out when it drops. Keep in mind that if the market moves more quickly than your limit order can be filled, your trade may not be executed 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.
When it comes to your stock trades, never assume anything. A lot of traders have ended up buying twice as much stock as they wanted to after thinking an order had not been executed and placing a second one. Speak with your firm and ask them how you can confirm that your order has been executed so that you dont end up making this mistake.
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