Limit Order, Market Order and Margin Trading
Basically the trader can use two types of orders
a) Market order
b) Limit order
Market Order -
Market orders are a buy or sell order in which the trader execute the order at the best price currently available.
For example -
If trader wants to buy 50 shares of company Jindal steel and power and trader put in a market order for 50 shares and hit the execute button. The stock order will automatically be matched up with the stocks current market price (trading at that particular time) and executed.
Advantage of Market order
a) No wait time, the order will be executed immediately with the current market price.
b) It is 100% confirmed that the order will be executed and will not remain in pending order.
Disadvantages of Market Order
a) It is not sure at which price the order will be executed.
b) If you are seeing the current market price for your stock at Rs 250 and if you hit the execute button and suddenly if
the stock price increases to Rs 255 then there is probability that your order will get executed at Rs 255 and not at
Limit Order -
A limit order is an order placed to buy shares at or below a specified price or to sell it at or above a specified price (called the limit price).
If trader wants to buy 100 shares of DLF at Rs 250 a share then the trader will place the limit order for Rs 250 and once the market price of a share reached at Rs 250 then the order will be executed automatically.
Limit orders can be used in both the buying and selling of stock.
Advantage of Limit order
a)The trader or investor will be sure the price at which the order will be executed.
If the trader puts Rs 100 as buy or sell order then the order will executed at this price only.
Disadvantage of Limit order
a) It is not sure that the order will get executed at the specified price because the share price has to come to that limit price to get executed. So the order may remain pending if in case the price doesn’t come to the specified limit price.
Stop loss order
The stop loss orders are used to reduce losses if in case the market turns against your trade and starts moving other side.
If you want to know how the stop loss order is used to reduce the losses in trading then please visit below link
What is Margin Trading
The extra amount received for trading (only for day trading) from broker is called as margin amount and trading done using this amount is called as margin trading.
Nowadays some brokers provide margin for one week and some brokerage may charge interest rates also. So get proper information from your broker before using margin amount.
To know how to trade using margin amount and what are its limitation and risk, please visit below link,
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