Almost everyone at one point or the other have heard about stock market and even without knowing much about it, we know it basically has to do with buying and selling of stocks. The idea of buying a stock, is to purchase or start a transaction, while the idea of closing a stock is to sell off what was initially purchased. In placing an order, there are different categories which are definitely not new to stock experts but to some of us who are newbies into the system and people who have no idea at all, there are types of orders that should be explained.
• A market order: When stock is purchased or sold at the market price, the market determines the price of stock, no individual can determine what the price of stock will be at a given period only speculations could be made in that regard.
• A limit order: This scenario describes the price that a buyer or a seller wishes to sell his or her shares, when a limit order is set it provides an investor with the right not to sell his shares either above or below the target he has set, but this does not affect the market price or value in any way. The limit order is often categorized into: A sell limit order and a buy limit order, the sell limit order is when the investor decides not to sell his stock beyond a certain price he has set and the buy limit order is when an investor or a random buyer decides not to buy above a certain price, in both cases the buyer and the seller will wait until they get a buyer or seller respectively that suites their need.
• A Stop order: A stop order is set to prevent an investor from running at a complete loss, the stock market is generally unpredictable and anything can happen at any time. A stop order could be set by an investor on his stock and immediately price falls to the amount he has set, his stock his sold off immediately. An investor can decide to set a stop order at $10, which means the price is no longer favourable to him the moment it drops below $10, at the moment that price is hit in the market, his stock is sold immediately in order to avoid further crash.
• A stop-limit order: This is similar to the stop order but has its own unique difference, the investor in this case can set a stop order where his stock should be sold but only if the price has not gone below a certain amount. An investor may decide to set a stop order at $10 but he gives a limit instruction that the stock should only be sold if the price has not gone below $9. While carrying out the transaction of the stop order explained initially, the price may drop further and eventually get sold at $8 but with a stop-limit order, immediately it gets less than $9, the stock remains unsold.
I am trying to learn more about the stock exchange market and if you are on a similar path with me, I am glad you came across my post, thank you and make sure you are staying safe.