Types of Orders to Buy or Sell Stocks INTRO: Part of successful investing in the stock market is knowing the language. Even when a decision has been made to buy or sell a stock, the way you enter the order can make a difference. Here to explain why in Bruce Hagan, certified financial planner with RAI Investments and Corporate Securities Group. Q1: Bruce, if I want to buy a stock can’t I just call my broker and simply tell him that? A1: Yes, and hopefully he or she will ask you for some clarification on your order. A market order is an order to buy at the best price available when the order reaches the trading floor. In most cases an investor who has a financial plan, a long term outlook and is buying a stock as an investment rather than a short term trading vehicle may be comfortable entering this type of order. The actual execution price may be a little different from the previous trade quoted. Q2: What if the stock price is swinging up and down significantly? A2: You can enter a limit order which is an order to buy or sell at a specified (or better) price. Say the stock has traded during the day between $24 and $26 and your decide you don’t want to pay more than $25; you could enter a limit order at 25 and your order would be filled only if it can be done at 25 or lower. The problem here is that if the stock doesn’t pull back from 26 to 25 and keeps heading higher, you won’t own the stock and won’t profit from a positive situation you correctly identified. Q3: What other type orders can you enter? A3: You can enter a stop order which specifies a certain price at which a market order takes effect. For e4xample, suppose you had purchased a stock at $25 and it had risen over time to $45. You decide you wouldn’t mind taking profits around this level but would also like to continue to own the stock if it keeps moving up. You may enter a sell stop order at say $41. In this case, if the stock pulls back to 41, your order becomes a market order and your sell is executed at the next price traded. If the stock doesn’t pull back and in fact goes to $55 your order is not executed. You may choose to then cancel your order and place a new sell stop order at say 51. In this manner you keep a "floor" under your stock. One obvious drawback to this is you can get "whipsawed" in that the stock could pull back to 41, you get sold out and then the stock which you don’t own goes to 55; but it can be a good way to protect profits. Q4: If you put in a limit order for say 500 shares of stock is there a guarantee that you will get all 500 shares? A4: No. Orders are filled in a sequence determined by the rules of the various exchanges. Limit order for more than one share can be filled in whole or in part unless the order is specified as "all or none" (which means fill the whole order or no part of it during the trading day) or "fill or kill" (which means fill the entire order immediately or cancel it). Q5: How long can it take to fill an order? A5: An order entered as a "day order" means your order is only good for that day. A "good-until-canceled order" is an open order which remains in effect for six months unless cancelled by the client. Q6: Of these various ways of entering orders, is one better than the others? A6: Not really. Just as in other areas of investing there is no "silver bullet" of inherently superior strategy; it depends on the specific situation, stock volatility and individual preferences. The discussion offered above and in the movie should not be considered an endorsement by Florida State University. They are offered in the educational sense of providing thought-provoking information for our Web audience. Copyright shared with Florida News Channel (FNC), all rights reserved. Broadcast 3/10/00