Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 153

still pending) your order would never execute, but if the stock drops back to $52, then your order would be executed. If you had used the stop order instead (without limit), at $52 your order would have awakened and immediately executed at $52 per share (or it might have executed at a higher price if the stock had quickly moved higher). Should you use stop orders? They do offer certain benefits as you can see. But as an average investor, you can probably get by without them. If you are (or are planning to be) an active investor, I am sure stop loss orders would be a staple in your daily investing activities to curb possible losses or play the momentum curves. (I will explain momentum later on.)

That's it for the stock order types. If you are an average and cautious investor, I don't see why you would use anything but limit orders. If not, proceed at your own risk. Always remember the supply and demand rules of the market. Just because you have an order placed, there is no guarantee that it will get executed. A specified limit or stop price may never be reached, or there may simply be not enough activity (volume) for that stock to accommodate everyone.

One other topic to cover in this section has to do with the lifetime or duration of your order. You may be wondering how long an order can remain pending before it expires. That depends on your specification.

There are usually two types of specifications for order duration, good till cancelled (GTC) and good for the day (Day). GTC orders continue to persist until either your order is filled or you cancel the order. This means you may enter an order to buy or sell stocks and your order may stay in the system for days before it is executed. Usually, with this type of order, the broker may automatically cancel the order if it sits for too long, for example 60 days. Check with your broker for this limit. My preferred order type is Day order however. Day orders have a duration

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Copyright and Disclaimer
Book Chapters
Table of Contents Copyright and Disclaimer Foreword Money
Bonds Futures Stocks Options
Mutual Funds Retirement Final Words Appendix A

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