Stock Market Order Types (Market Order, Limit Order, Stop Loss, Stop Limit)

In this video we'll look at the four basic

order

types

you need to know before buying or selling

stock

s. If you haven't subscribed to the channel yet, be sure to subscribe for more videos on money and conscious living. and after you sign up, let's bring

order

types

to a real-world situation so we can understand what exactly an order type is. When you call a restaurant to place an order, they will pick up the phone and ask if this is the case. Order for takeout or delivery, all you are doing is letting them know how they need to deliver your food to you and at what price.

The same goes for the types of orders for investing, except instead of buying food, we are When buying

stock

s, all you are doing is letting the investment broker know how and when you are buying your stocks and at what price you want them. These are the four types of orders that we will see in a

market

order with a

limit

. Order a

stop

loss

and a

stop

limit

and we will see what happens with these when we buy and when we sell first. We have the

market

order. This is the most basic type of order. All it is doing is basically saying I want to buy a stock and I want to buy it now or if you are selling I want to sell a stock and I want to sell it now, when you place a market order you will buy the stock at any price. the price is between the time you press the Buy button and the time the trade actually executes.

Oh point zero seven seconds later or however long it is, but why mention that point zero seven seconds because with a market order it can be important that stock prices are going up and all day long, we all know that, but also We know that some stocks can be more volatile than others, meaning they move more or faster with a market order. You are quite okay with that fluctuating price you are setting. in order to buy your shares or sell them at the best price currently available, market orders are where people who trade penny stocks can get into trouble, which is why this thing called pump and dump occasionally happens and yes, it really is called that .

The price of a stock will rise very quickly, but just as quickly it will fall again. These stock prices move so fast that what can happen is you hit the Buy button when the stock is here, but in that window like point zero seven two point one second. where your trade is executed, the stock can skyrocket and your trade can actually take place when the price is here. The same thing can happen when you're selling, you can hit sell at the top here, but the price can plummet during that point zero seven seconds and you actually ended up selling your shares here at a much worse price.

This is not really something to worry about. Market orders are probably the most common type of order, mainly the areas where you would need to keep an eye on a quick price. The change would be with penny stocks, sometimes a random news event can cause that to happen or with earnings reports or supply reports, those can also cause the price to change quickly, but the reports are always scheduled so you can see them and Avoid trading during those times if you don't want the stock to be super volatile. The next type of order is a limit order.

This is when you say: I want to buy the stock, but there's a limit to how much I'm willing to pay for it, so let's say. that we have a stock trading at $25 and you place a limit order for $20, which means that $20 is the maximum amount you are willing to pay, the trade will not be executed until it reaches the price you specify or below of the. this case $20 now let's see what happens when you sell with a limit order the same idea you are saying I want to sell this stock but there is a limit on how low I will sell it.

I will only sell it if it is above limited by $30, that means when the stock price reaches $30 or more, the trade will be executed and your shares will start selling. Also note that with a limit order that does not necessarily guarantee that your trade will be completely executed, only part of your order may be executed if the price moves. too quickly and you don't get back to your limit price and you may also complete several different parts, so when you look at your account summary you may see several different purchases that are a cent or two off each other.

This is because your order has completed multiple parts at multiple different price points. The next type of order is a stop

loss

. This is when you are waiting for a stock to rise to a certain price before you are willing to buy it, it may not. I don't want to buy a stock currently because I am not completely sure which direction it is going so I want to wait for this stock to start trending up so I will set my limit at $11 which means once it reaches at 11 dollars. Dollars. I'm pretty sure it's trending up, so that order, once it hits $11, will become a market order and the stock will be bought at the next available price when a stop loss order is used to sell this.

This is when the name stop loss starts to make a little more sense, you use a stop loss to avoid losing money if the stock price falls, so you are stopping the potential loss, hence a stop loss, so which we have two scenarios in which it could happen. It makes sense to use a stop loss scenario in the first scenario, you could say: "Okay, I'm buying at $11 because the stock is trending up, but if for some reason the stock price starts to fall, I want to get out." at 10:50, so that's where." I am going to set the stop loss order, if the stock price drops to $10.50 it will become a market order and sell at the next available price.

In this case, you would use the stop loss order to sell around 10:50 and take a small loss rather than holding on to it while the stock price potentially continues to fall. The second scenario where you might want to consider using a stop loss is to maximize your profits, so let's say you enter a stock at a really low price. Good price, the stock is up a lot, but you're not really sure how much more it can go before the price starts to go down again. You don't want to lose the profits you already made, which is why you said sell a little. below the current price, so in case it starts to fall, you won't give back all the profits you made.

The last type of order is a stop limit order and, as you can probably tell from the name, it is a combination of a stop order. loss and a limit order with a stop limit order, you are waiting for the price to go up and once it reaches that target price, a buy limit order will be triggered once the stock price starts to fall again , in this case our stock price starts at $45, but we are not going to buy yet because we want to wait for confirmation and that it is trending up, so we are going to set our stop price at $55 because at that point, if it hits $55, we're pretty sure. that is trending up, we don't really want to pay the full $55 for it, so we set our limit price at $53 and that way, if the stock price pulls back a little, we can enter at a slightly better price on the first sale. with a stop limit once the price falls to any price point you set as a stop a sell will be triggered at the minimum price you enter as a limit so if we set $25 as our stop and $24 as our limit if a stock falls to $25 our limit, now the sale of our shares will be activated at no less than $24 our limit, both with buying and selling, there is a possibility that the order will not be executed if there are gaps in the shares, What you see on the chart is something.

So, this happens when a price changes very quickly, so people were willing to buy and sell at this price and people were willing to buy and sell at this price, but they just It skipped all the prices in between, so if your order was set to sell somewhere in this range, it has the potential to skip it completely again. This doesn't happen too often, but it's something to keep in mind, which is why market orders limit orders and stop limits are the basic four. Order types you will see at virtually every brokerage. Some order types may vary from brokerage to brokerage, but those are the basics.

That's what you need to know. If you enjoyed this video, be sure to give it a like. Subscribe to the channel. and I will see you in the next video