Working with Stock Orders
You are learning to trade the stock market and you have been filling your brain with wonderful information that is going to help you consistently profit in the stock market!
One vital piece of the profit puzzle that you may still be missing though is knowing exactly how to place your stock orders now that you know the stocks you want to buy.
We are here to help you understand how to do exactly that!
One of the most important actions you can take to ensure that your profit finds its way into your wallet is to understand how to properly submit your stock orders.
To correctly submit your stock orders, you need to know the types of orders available and how to create and submit them to protect your capital.
More importantly, you must begin putting your learnings – and earnings – into action.
This means you need to open a virtual trading account and practice the process so you know what you are doing! Some places to begin practicing your trades would be
- Tradesmart University
- V-Trading with OptionsXpress
- Think or Swim
Now that you know where to practice, let’s look at what you need to know about working with stock market trade orders.
The Four Orders
Trades have four primary order identifiers. It could also be said that there are two types of stock orders, each of which has two possible purposes.
The four identifying terms I am referring to are Long, Short, Open, and Close. These could also be viewed as two types of stock orders (Long and Short) with two possible purposes (to open a trade or to close a trade).
If you see a stock you believe is going up, you want to buy that stock and you will aim to sell that stock for a profit after the value has increased. This is called a Long trade.
If you are “Going Long” on a trade, you are BUYING that stock.
On the contrary, if you see a stock you believe is going lower, you want to SELL that stock while it’s high so you can buy it lower later.
This is called Short.
BUY = LONG. (Always buy low)
SELL = SHORT. (Always sell high)
Both short and long trades have one of two possible purposes. These actions either OPEN a trade or CLOSE a trade.
An OPEN order is an order that initiates a new trade, be it long or short. A CLOSE order is simply an order to end a trade.
You can buy or sell a stock to open a trade and you can do the same to close a trade. However, your closing order will always be the opposite action from what you used to open the trade.
For example, you open a long trade by buying a stock. You will close that trade by selling the stock. In the example of the short sale, you want to sell high and buy low. The selling high opens the trade and buying low closes the trade.
You may be wondering how one sells a stock he or she doesn’t own. In the case of the short sale, if you see a stock you believe is going lower, you will sell the stock by borrowing the stock shares from a broker.
You buy the stock back later at a lower cost and the price difference would be your profit. The actual stock shares are returned to the broker. Thus, you have opened the sale by selling and closed the sale by buying (and returning) the stock.
A short sale is essentially a long trade in reverse.
In either case, your strategy is always the same: buy low and sell high.
Now that you understand the basic types of orders, stay tuned for our next blog which will explain exactly how to write and submit your market orders.
Still, have questions? These articles are just the basics to get you started. You can always learn more.
Continue learning about placing your stock orders by following this blog series or dig into higher learning by going to www.tradesmartu.com to find all of your answers.
And remember to share this blog on Facebook and tweet it out to your friends. Hopefully, your coworkers will leak it to your boss that you are learning to make money in the stock market.
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