Different Trade and order types explained

In my earlier post about Picking a Stockbroker I mentioned that there was different ways to place an order to buy or sell shares…

You may also want to check that they offer some different trade types apart from the standard “Quote and Deal” Buy and Sell orders.  Other types include Limit Orders, Stop orders, Trailing Stop Orders, 

So here I will explain the Different Trade and Order types…

Here is a screenshot of the Deal Screen in Barclays Stockbrockers

Deal share online deal options
Deal share online deal options

Different Trade and order types explained – here goes

The terminology that I will use here is that used by Barclays Stockbrokers, you may be using a different Broker but the Order types will be the same but named slightly differently. e.g ‘Quote and Deal’ could be called ‘Market Order’

Quote and Deal / Market Order

Tell what the price is now, and if I like it I will buy!

This is basically a buy it now button! It will only work when the stock market is open (8 am to 4:30 pm Monday to Friday)

So you select this and your dealing platform will offer you a price on your screen with usually a ten second countdown.

If you click ‘Accept Quote’ you will have bought or sold the shares.

Of course you can use this to see what the price looks like and then not accept the quote if you don’t like it – no harm done!

At best Order

Just buy the shares now I don't care what the price is!

This type of order will buy your shares as soon as possible whatever the price!

I have used this in the past when I cant get a quote for a particular share but I am desperate to either buy or get rid of a holding.

You may not get quoted if the share price is quite illiquid or you aren’t buying the Normal Market Size (now called EMS – Electronic Market Size)

You could in theory set up your orders before the market opens and they would execute as soon as the market opens but I wouldn’t recommend this because the Market makers who set the prices at the point the market opens will give you a bad deal on the opening bell.

Because you can’t set a price or see a quote, the actual price you buy or sell at may be higher or lower than you wanted.

Your broker should detail in words what you are about to do for example…

Confirmation guide text

It is worth reading this to make sure you agree with what they will do before you hit the button!

Limit Order

Buy or Sell when it hits this price please...

So you would use this to buy or sell a price in the future that the share price may reach…

Your order will be placed automatically once your target price is reached.  It can be placed and in waiting to pounce for 30 days. Your stockbroker will ignore this order if the share price doesn’t reach your target price.

Stop Order

If the price falls to here get me out quick!

You can set a stop order to get out at a price of your choice if reached.  So if you only want to loose 10% maximum on your investment you would set the Stop loss order 10% away from the price that you bought at.

Even better if you have made 30% profit so far you can set the stop loss order again 10% below the current price and you can rest easy knowing that your investment will not fall more than 10% locking in 20% profit.

Trailing Stop Order

I don't know if this is the best time to buy so follow the price for me and buy when the tide changes...

If you are about to buy but you are not sure if the price is going to continue going up, you could put on an order to say if the price goes up another 2p from the current price then buy.

So if the price fell another 10p from the original price when the trade was placed and then went up 2p you would be bought in. i.e your order follows the price until it goes up 2p. In this example you would have got in at a better price saving you 8p per share.

When selling you can do the same when prices look like they have hit a peak but you aren’t sure you set up a trailing order to follow the price.  If it goes up more, your trade wont sell if it goes down, your trade will sell.

This can potentially help you get a better deal.

You will always see a confirmation of costs before you are able to accept the quotation see below image for example – you can see the commission I would be charged and the Stamp Duty that the government take.

Confirmation costs

So I hope this has been helpful for you? Anyway practise makes perfect and you will soon learn when to use these different order and trade types.

 

 

Published by

Investor John

Investing as a Private investor John has shown success over the last 15 years with a straight forward common sense approach to investing - He can help you to learn and will gladly share his knowledge to get you started.

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