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.
Traders need to have a handle on how things can happen in these rapid trades lest they be blindsided by these fast fluctuations in price. A high volume of trades can outpace the ability of quotations to reflect the real price at that moment. These conditions can also cause a trade execution and conformation to lag behind actual prices. Internet based traders are used to getting real-time information; but under some circumstances, these kinds of delays can and do happen.
The thing to keep in mind here is that the SEC has no rules in place as to the time frame in which a trade must be executed. Thankfully, firms which publish a speed they can be held accountable for exaggerating this figure or not informing investors in the event of 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).
Should you want to buy a hot IPO that was initially offered at $9 but don't want to pay more than $20 for the stock, you can place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, you will not end up buying the stock at $90 and then suffering immediate losses as the stock drops later. Also remember that your limit order may never be filled if the market moves too fast before your order can be filled. Limit orders will protect you from buying the stock at too high a price.
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.
If you place an order, never assume anything. Some investors have mistakenly assumed their orders were not executed and placed another. Then they either owned twice as much stock as they wanted. Talk with your firm on handling these situations where you are unsure if your original order was 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.
Traders need to have a handle on how things can happen in these rapid trades lest they be blindsided by these fast fluctuations in price. A high volume of trades can outpace the ability of quotations to reflect the real price at that moment. These conditions can also cause a trade execution and conformation to lag behind actual prices. Internet based traders are used to getting real-time information; but under some circumstances, these kinds of delays can and do happen.
The thing to keep in mind here is that the SEC has no rules in place as to the time frame in which a trade must be executed. Thankfully, firms which publish a speed they can be held accountable for exaggerating this figure or not informing investors in the event of 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).
Should you want to buy a hot IPO that was initially offered at $9 but don't want to pay more than $20 for the stock, you can place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, you will not end up buying the stock at $90 and then suffering immediate losses as the stock drops later. Also remember that your limit order may never be filled if the market moves too fast before your order can be filled. Limit orders will protect you from buying the stock at too high a price.
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.
If you place an order, never assume anything. Some investors have mistakenly assumed their orders were not executed and placed another. Then they either owned twice as much stock as they wanted. Talk with your firm on handling these situations where you are unsure if your original order was executed.
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