Trading stock online is not like shopping on the high street where you know prices on assets and products are fixed. Stock prices are volatile and are effective by active bidding which consists of buyers and sellers. Online stock trading is described as being priced in ‘real time’. There are a number different ways in which you can trade stock online.
One of the most common ways to trade stock online is with market orders. Through a live broker you sell your shares at the best price possible or you decide to buy shares at their present price. Market orders are initiated immediately. As they are straightforward they tend to have low commissions. Another option is to use limit orders to trade stock. This consists of selling your stocks at a specific price or buying stocks when they have reached your desired price. Limit orders are only carried out when your set prices are met.
Alternatively, you can choose to implement stop market orders when you trade stock online. Stop market orders work in a similar way to limit orders, you can set prices at which you chose to buy or sell. When this price is met, the order is converted into a market order and is then applied. Some traders opt for stop limit orders to manage their trading of stock as you are able to assign an activation price. In a similar way to stop market orders, when the specific price is hit, the order is converted into a limit order based on the limit order you have allocated.
When trading stock online you can regulate trailing stops. Limit orders are put in place and executed, if not, they expire. However, with trailing stop orders you can only sell a stock if it decreases to a certain number of points or a specific percentage. This is particularly advisable if you are trading individual stocks. Before you chose to buy a stock, you should determine how far you will let the price fall.
Other stock trading option involves designation lots. If you chose to buy the same stock continually, this builds a bundle of stock which is named ‘a lot’. When you decide to sell, you then sell the lot which you have been holding on to for the longest amount of time. There is also the choice to set time frames when trading stocks online. You can put into action an order for a stock for a time frame you decide. For example, you can chose to only activate the trade for the single trading day and then the order expires. However, you also have the option of executing orders which will stay open until you chose to close them, at any time.