Trading stocks online with E-Trade is relatively easy, however, there are a few things to know. In addition to basic market orders (orders where users buy or sell securities based on market price), the site has an easy setup for initiating limit orders. Placing limit orders in stock exchange is simple and very convenient, as people may buy and sell securities without monitoring the market.
Buy Limit Orders in Trading Stocks Online with E-Trade
Limit orders, according to the US Securities and Exchange Commission, are orders that may be initiated by users to either buy or sell securities once they reach certain values, according to the market. In buying stocks, a user may set a value at which he or she would like to buy a certain number of a certain security. For instance, if one particular stock is trading at $8 a share, a user may set a limit order to buy, say, 50 shares once the stock’s value has reached a given value, like $5 a share. These orders may also have a time limit specified. For the above example, if the limit order was placed for 2 days, then if at any time within 2 days of the order’s activation the market value would drop to $5, or drop below $5 for that security, as soon as possible (depending on availability of sellers) 50 shares would be purchased.
Placing Limit Orders to Sell in Stock Exchange
Also, users may place limit orders for selling stocks. Suppose that someone has 50 shares of a stock with a market value of $8. This user may place a limit order to sell, say, 30 of the shares once the value reaches a higher price, such as $10. Again, supposing that the user placed the order and set a 2 day expiration, if the value of the stock reaches $10 dollars or more over the next 2 days, the user will sell, automatically and as soon as possible, 30 shares if buyers are available. Essentially, these orders are for buying or selling certain amounts of certain stocks within certain periods of time (all specified by the user).
Limit Orders in Trading Stocks Online at E-Trade- Things to Consider
When trading stocks online with E-Trade, according to brokersperth.com it is important to consider a few things regarding limit orders. Limit orders remain live and will be executed if the opportunity arises before their deadline expires. People who use E-Trade may cancel limit orders, or modify them, but it is best not to forget them! Going back to the buy example from before, if someone has a limit order that will be active for 30 days to buy 50 shares of a stock once the market value drops to $5 or less for that stock, the order will be carried out if the opportunity arises within 30 days.
So, if the user uses most of his or her available funds for something else, leaving little or no money in the account, then if the limit buy order is not canceled, it will be carried out within 30 days if the stock’s market value drops to the limit price. This transaction will occur, regardless of available funds, and when funds are low, the user’s account will be charged and fined for the overdraw. Upon using many funds for other purposes, it may be best to cancel limit buy orders. When trading stocks online with E-Trade, limit orders in stock exchange are great utilities, but they should not be neglected. They can really help those who cannot constantly monitor the market, but if limit buys are forgotten and carried out, they can result in fines. Also, when placing limit orders, it may be a good idea to adjust the limit price if market value rises or drops much faster than predicted, as more money could be saved, or made doing so.