Basic guide to inventory order types

Spark Global Limited reports:

When trading on stockbroking platforms, there are a variety of stock types available.
Some order types can be executed immediately, while others can only be executed at a specific price or time.
Therefore, it is important to familiarize yourself with the most popular types of stock orders and how to best use them.
This beginner’s guide will give you a starting point through basic order types and let you know what is right for you and feel confident to trade.
We will discuss the main types of trading orders and examine how day traders can use them to improve their risk management strategies and trading efficiency.

About Stock Orders
If you’ve traded stocks before, you’ve probably had experience with a variety of stock order types.
In financial markets, an order is an order given by a trader to a stockbroker or trading platform to buy or sell a particular security, such as a stock, at a particular price or range.
When you trade stocks, you can list conditions on how the broker will execute the order, as well as time limits and price limits for executing the order.
Main order types: limit, market and stop loss
Traders have access to a wide variety of order types, and they can use different combinations to trade. However, the three main types of stock orders are:
Limit order
A limit order is when you ask to buy or sell a stock at a set price.
Traders use a price above or equal to a specific price when selling a stock and a price below or equal to the current market price when buying a stock.
For example, if you want to buy Apple stock at $110 a share and the stock is currently trading at $120, the broker will wait until the price reaches your upper limit before buying the stock.
The market order
Market order when you ask to buy or sell a stock at the current market price.
The order is valid on the day only and, where market conditions permit and the shares are actively traded, it usually results in the immediate purchase or sale of all the underlying shares.
This is the most basic type of stock order. You buy or sell a security immediately, without delay, and at/near its going price.
If you are selling shares, you will receive a number close to being displayed as “bid”. At the same time, if you are making a purchase, you will pay a figure similar to the “request” shown.
Simply put, a market order guarantees that the broker will execute the order immediately, but not at an execution price.
This type of order can be dangerous to use on highly volatile stocks because you may get a quote that is very different from what you see.
Stop (stop loss)
A stop loss order, also known as a stop loss order, is an order to buy or sell a stock once it reaches a specified price, called a stop loss price. Once the stop-loss price is reached, the stop-loss order becomes a market order.
Learning how to place stop-loss orders on trading platforms is crucial for most stock traders.
This is the surest way for traders to prevent huge losses when prices unexpectedly move in the wrong direction.