Understanding how to place orders is critical for executing trades effectively. Let’s explore each type in detail.
Market Order:
- What It Is: Executes immediately at the best available price.
- When to Use: When speed is more important than price.
- Example: You want to buy 10 shares of Tesla quickly, so you use a market order.
Limit Order:
- What It Is: Executes only at a specific price or better.
- When to Use: When you want control over the price.
- Example: You set a limit order to buy Tesla at 700,anditonlyexecutesifthepricedropsto700,anditonlyexecutesifthepricedropsto700 or below.
Stop Order:
- What It Is: Converts to a market order when a specific price is reached.
- When to Use: To limit losses or lock in profits.
- Example: You set a stop order at $650 to sell Tesla if the price drops, protecting against further losses.
Stop-Limit Order:
- What It Is: Combines a stop order with a limit order.
- When to Use: For more precise control over execution prices.
- Example: You set a stop-limit order to sell Tesla at 650,butonlyifthepriceisabove650,butonlyifthepriceisabove640.
