How to Enter Trades
Have you ever placed an actual order in the market? I’m assuming the majority of you have done so if you are looking at purchasing the TradingSim simulator. One thing you will notice when trading is you need to get in the repetition of not just identifying your best setup and managing your account value, but also the mundane task of how to enter trades. If you’ve been trading long enough you will have undoubtedly had the blunder order where you were watching one stock and accidentally executed an order on another because your order bar was still linked to the old symbol. Well no fear, you can practice opening and closing as many orders as you like with the TradingSim application. Learn how to handle the small tasks so you can manage the larger one of actually making money in the market.
Below is the list of market order types available in the TradingSim application.
What is a Market Order?
A market order is an order to buy or sell a stock at the current market price. Unless you specify otherwise, your broker will enter your order as a market order.
The advantage of a market order is you are almost always guaranteed your order will execute (as long as there are willing buyers and sellers).
What is a Limit Order?
Another market order type is a limit order, which is an instruction to your brokerage firm to buy or sell a security at a set price. Unlike other orders which can trigger execution at market, a limit order requires that your specific price is hit in order to execute the trade. The only caveat to a limit order is that if your price is never reached, you will never be able to enter or exit the position. Limit orders are viewed as more of a defensive trading strategy for entering and exiting positions. Traders with more experience or who need fast execution will want to execute orders at market. Market and limit orders are the two most widely used forms of trade execution.
What is a Stop Market Order?
A stop market order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is reached, your stop order becomes a market order.
What is a Stop Limit Order?
A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at a specified price.
The benefit of a stop-limit order is that the investor can control the price at which the trade will execute. However, as with all limit orders; a stop-limit order may never fill. This may happen especially in fast-moving markets where prices fluctuate wildly.