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Trading 101 market_limit


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Market, Limit, Long, Short, Orders

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Trading 101 market_limit

  1. 1. Placing Stock Trades Trading 101
  2. 2. Market Orders• The simplest and most frequently used order type.• These orders tell the game that you wish to purchase the stock at whatever price is at the market close (4PM)• Market orders placed early in the day can be “dangerous” because we never know where the market for that stock will be at 4PM
  3. 3. SMG Trading Platform
  4. 4. Limit Order• A buy limit order specifies a price that you are willing to pay for a company stock. The order will not go through unless it is at or below your limit price. “I don’t want to buy XYZ for more than $10.”• A sell limit order specifies a price that you are willing to sell the shares for. The order will not go through unless you it is at least or above your limit price. “I don’t want to sell XYZ for less than $14.”
  5. 5. Limit orders require a limit price
  6. 6. Short Sell• Shorting a stock constitutes a “bet” on the downside. You believe the stock will go down so you short sell the stock.• Essentially, you borrow the stock from the SMG, and sell it immediately at a price you feel is too high.• When the short sale is executed, the cash from the sale is placed into your account.• You will use that cash later to cover the short position and make a profit.
  7. 7. Short SellShortSell
  8. 8. Short Cover• You opened a short position by selling a stock short (short sell).• When you close your short position, you enter a short cover order. This will return the shares back to the SMG (which you borrowed in the first place).• Essentially, you use the money you got when you borrowed the stock from the SMG and sold the stock short at a high price.• For example, you short sell the stock at $10 and then short cover at $5… in this scenario you make $5
  9. 9. Short Cover
  10. 10. Questions?Market, Limit, Buy, Sell, Short Sell, Short Cover