Learn about stock trading orders:

Learn about stock trading orders

Once you have your trading account with a financial brokerage firm and you have a ready-to-invest budget, you can use the broker's trading website or private trading platform to execute your stock trading deals.

Terms like "market orders" and "limit order" may seem complicated, but they are really simple concepts that you can understand with a little work. Most investors do not want to use many trading aids, but it is smart to think of them as potential tools in your stock trading arsenal.

Market Order

The simplest and most common type of stock trading is a market order. As the market order that you want is required of your broker simply you are ready to take any price offered to you when executing your order. These orders are often subject to the lowest commission because they are easy to execute.

Imagine buying 100 shares of Apple. Let's say the current market price is $ 181. You can log in to your brokerage account or call your broker directly on the phone and tell him, "Place a market order for 100 Apple shares, AAPL stock symbol." As the order time that takes a few seconds passes, the market price has gone up or down, for example, $ 181.50 or $ 180.60, and the total cost without commission will vary accordingly.

Limit Order

A limit order makes you able to specify the maximum price you wish to accept or the minimum price that you wish to accept when buying or selling shares. The main difference between a market order and a limit order is that your stock broker cannot guarantee the implementation of the latter.

Imagine that you wanted to buy 300 shares of the Bank of the United States. The current price is $ 55 per share. You don't want to pay more than $ 52, so you place a specific order for execution at $ 52 or less. If the stock falls to this price, your order should be executed.

There are three considerations to consider before placing a limit order:

The share price may not decrease (or rise) to the limit you set. As a result, your request may not be executed.

Specific orders are executed by your broker in the order in which they were received by you. The stock you want to buy (selling price) may reach the maximum price you want, but your order has not been executed due to the price fluctuation above (your below) limit before the broker reaches your order. It is occurring that it has become less common in the era of electronic trading but you should bear this in mind.

If there is a drop in the share price, your order will be executed at the maximum price. In other words, imagine that the stock you want is trading at $ 50 a share. Suppose you set a limit order of $ 48 per share. At the same time, the company CEO resigned for some reason at the same time that you placed your order, and during the same trading session, the share price fell to $ 40 a share. Since the price has fallen below the price you placed the limit order, your order was executed at $ 40 per share. You are now bearing a loss of $ 8 per share.

To protect yourself from sudden shifts in the market, many professionals recommend that all stock trading operations, whether you buy or sell stocks, be placed as limited orders.

Stop Orders

In a common language, stop and limit orders are known as “stop-loss” orders because speculators use them to take profits from profitable trades. Most investors are not interested in these types of orders, but it is useful to understand how they work.

A stop order automatically converts to a market order when a predetermined price is reached (referred to as a "stop price"). At this point, the regular rules of market orders apply, where the execution of the order is guaranteed, because you simply may not know the price trend - it may be higher or lower than the current price mentioned for the required stock.

Compare this to a stop-limit order, which automatically turns into a limit order (not a market order) when the stop price is reached. As discussed earlier in this tutorial, your order may or may not be executed depending on the movement of the security's price. 

Trailing Stop

 One way to automatically protect gains and limit losses is by placing an additional stop order. With the trailing stop, you can set the stop price by either setting fixed points or by setting a percentage of the current market value.

Imagine that you bought 500 Hershey shares at $ 50 a share. And the current price is 57 dollars. And you want to keep the $ 5 gain of the stock you made, but you want to continue to hold the shares, hoping to take advantage of any further increases. To achieve your goal, you can place an over stop order with a stop value of $ 2 per share.

In practical terms, here's what happens: your order will be placed in your broker's books and automatically adjusted by shifting it up as the normal Hershey share price rises. At the time your trailing stop is placed, your broker will sell HSY shares if the price falls below $ 55 ($ 57 for the current market price - $ 2 to stop the excess losses = the sale price of $ 55). 

Imagine that Hershey shares rose instead of falling to $ 62 a share. Now, your trailing stop will automatically keep up with the price hike and will turn into a market order with a selling price of $ 60 (the current stock price of $ 62 - $ 2 plus stop value = $ 60 per share selling price). You should make a profit of $ 10 per share.

Stock trading - how to choose

Wherever your site is in the trading process If the matter is on an investment-trading scale, these tips below for how to trade stocks can help ensure and secure safe trading for you:

 

1. Practice, then practice, then practice to learn stock trading

But not with real money. There is nothing better than low-pressure practical experience, which investors can obtain through virtual trading tools offered by many global brokers. Stock trading allows clients to test their trading acumen and create a proven track record before putting real dollars to the test. You will need a stock market app or a stock market platform like MetaTrader 5 that will allow you to connect to your stock trading account from any device: a personal computer (MAC or Windows) or a mobile device (Android or iOS) or a browser (Chrome, Internet Explorer, Firefox, Safari, and many others).

 

2. Measure your returns against a suitable standard

This is a basic tip for all types of investors - not just the active ones. The primary goal in choosing stocks is to move forward with the benchmark index. Let's say for example the Standard & Poor's 500 Index (which is often used as an agent for "the market"), the All-Share Composite Index (for those who mainly invest in technology stocks) or other smaller indicators that are made up of companies of smaller size-based size, Or industry and geography. Measuring results in this situation is essential, and if a serious investor is unable to outperform the index (something that professionals are even struggling for), then it makes sense and financially to invest in a mutual fund for a low-cost index or ETF - meaning to choose a basket of stocks that matches Mainly with benchmark performance.

 

3. Choose your stock trading partner wisely

To trade stocks, you really need a broker but do not sign up with the first financial broker that appears on your way. Choose one with the terms and tools that best match your investment style and experience. The priority will be for daily trading enthusiasts, ie active brokers, who provide low commissions and guarantee the quick execution of their trades quickly. New investors in trading should search for a broker who can teach them trading tools through educational articles, online educational programs, and personal seminars. Also, other features such as quality, availability of scanning tools, stock analysis tools and alerts, easy order execution, and a customer service department should be considered.

Stock trading - how to succeed:

1. Below is a quick summary of what to look for in stock trading - from the buy-side:

  • Earning revenue is more than 5%, with a payout ratio of less than 100%.

  • The average size of the shares is more than 300,000 shares.

  • They cost more than $ 2; Don't look for a quote in cents.

The public offering date for this stock must be more than a year old, and you can give preference to shares that have been publicly traded for 10 years or more

Invest in shares where the earnings per share ratio compared to the price is greater than zero (this indicates that the company is profitable) This concept is called P / E for (price to profits ratio) and also consider searching for shares with low P / E, for example. For example, the ratio should be more than zero but less than five as well, and make sure that the expected profit / P ratio for the next quarter is less than the current P / E ratio, this means that the profits are expected to increase, and if so, the purchase will be at the current price A good thing.

The leverage margin is more than 10%.

View the chart of the shares that were produced according to the above criteria. The following stock trading criteria:

Purchase of shares located in the main support areas in the long run. We want to buy stocks at relatively cheap prices (compared to historical data), not at exorbitant prices. Equity investing deals do not require a stop loss request, but you should consider your exit price if conditions do not improve for the stock. Investing in a stock does not mean that you hold on to it forever if it does not do what you expect. There are some possibilities about some types of stocks that remain in a steady decline mode Put this matter in your accounts.

Also, you must have a prior exit plan that guarantees a profitable exit from trading. Determine how and why you will come out. Since we used to support to enter the trade, you should consider exiting without a major resistance level in the long term. Once you exit your position, don't worry about what the stock will do next. Take the money and invest in other stocks, passing the same process again, as mentioned above.

This leads us to one final guiding principle:

If the buy is at the support and the exit planning is just below the resistance level, the potential for the upside should outweigh the downside risks (to $ 0) by at least 2: 1. This means that if you bought at $ 5, you should be able to exit the stock at $ 15 or higher. In the worst case, you lose $ 5 a share (but since we are not holding a loss, this is very unlikely and should not be expected to happen in general), but based on the historical chart, you could achieve $ 10 a share or more in gain. This is known as the risk/reward ratio.

Maybe things go a lot around buying shares in general. Investors tend to have much fewer ideas about how to sell them.

This is a mistake, as selling occurs when money is earned. Correcting things can be key to claiming your profits - or in some cases, minimizing your losses.

2. Here is a quick summary of what to look for in stock trading - on the selling side:

Check your feelings

There are good reasons to sell stocks and bad reasons 

Persistent poor performance, irresponsible leadership and management decisions may provide a list of good reasons. Perhaps you decided that your money would be better elsewhere, or that you would incur losses or offset the losses you owe due to income taxes.

Bad reasons are usually caused by a rapid reaction resulting from daily short-term market fluctuations or company news that came negatively. You may find that there is a weight on your losses, and this is the opposite of what you want. (You know the saying: low buy, high sell.) Before you sell the stock, skip your thinking to make sure you won't give in to an emotional reaction that you may regret later.

»If you realize that you are vulnerable to emotional investment? Your best option might be to use the Robo-Advisor financial advisor

Deciding on the type of request

If you're used to buying stocks, you're used to selling them - the order type options are similar. However, the goal is different: you can use order types to reduce the costs of buying shares. In selling, your main goal is to reduce losses and increase profits

Let's go through some examples. Let's say you own stock at the current market price of $ 40.

MARKET ORDER

The order will be executed within a few seconds at the market price. You can sell for $ 40, a little more or a little less - stock prices can fluctuate in the time it takes to place and execute an order.

Risk: Your shares can be sold at any price, without restrictions.

LIMIT ORDER

You set a sell order using the limit order, the order will only be executed if the stock is trading at or above your chosen price. If your limit order is $ 41, your order will be executed only if the stock is traded at price or above $ 41.Risk: You may end up not selling if the stock never rises to the set price.

STOP-LOSS ORDER 

You set the stop price and your order will be executed only if shares start trading at or below that price. If the stop price is $ 38, your order will be executed as a market order if the stock price drops to $ 38 or less.

Risk: You can sell below the stop price - there is no minimum. Also, a temporary drop in price may lead to a sale when you don't want to.

STOP-LIMIT ORDER

You set a stop order and a tear order. If the stop price is $ 39 and your limit price is $ 37, your order will be executed as a limit order at $ 37 or above if the offer price drops to $ 39 a share.

The risk: You have added the floor, but if the stock falls below the floor very quickly - which can happen in a volatile market - you may not sell at all.

Final words on stock trading:

We wish your first stock purchase will be the beginning of a successful investment journey. But if things get tough, remember that every investor - even Warren Buffett - has gone through tough times. The key to moving forward, in the long run, is to maintain your perspective and focus on the things you can control. And the market has no income in this matter. 

What you can do is:

Make sure you have the right tools for this to work. AM Broker can help you decide which broker account is right for you.

You should bear in mind that the fees charged by financial intermediaries. It can drastically diminish your return on profit.

Also consider the need to invest in ETFs, which allow you to buy multiple stocks in one trade. Our favorite and most recommended recommendation is the MSCI Emerging Markets Index.

We remind you of the reason:

The Saudi stock market has completed, and it has become the largest market in the region, having completed the second and final stage of joining the MSCI Emerging Markets Index, which raised the weight of the index, which is closely monitored, to 2.8 percent.

Their inclusion has resulted in billions of dollars in foreign flows since the beginning of 2019 and helped the Saudi index achieve double gains.

The full merger of the MSCI Emerging Markets Index represents a milestone in the progress of Saudi stocks and the opening of the trading market to attract international investors. 

The Kingdom opened the Saudi stock market to foreign investors in 2015. Since then it has introduced a series of reforms to make it attractive to foreign investors and exporters and expand the investor base, as part of an ambitious plan to diversify the economy.

 

MSCI upgraded Saudi Arabia from an “independent market” to an “emerging market” in June 2018. Saudi stocks were entered into the index in two phases with a 50% listing factor each, with the first tranche implemented on May 28 and the second on August 28, 2019.

 

As a result, the most cost-effective way to invest in Saudi stocks is through the iShares MSCI Emerging Markets ETF (#EEMUS) investment fund.

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