Stock Market For Dummies - Limit Orders

When you log into your account to buy or sell a stock (see how to buy a stock), you will have to choose what type of order you want to place. The standard options are "market", "limit", "stop", and "stop limit". Most of the time you should pick the "market" option as that just means you want to get the market price for your stock. In other words, you want what ever price is the going price at the moment you are placing your order.

The stock market for beginners is a hard enough place without trying to get too tricky. When you want to either buy or sell a stock at a certain price that is when you use the "limit" option. Let's say that you have 100 shares of XYZ Corp. and you bought those shares at $20.00. Right now the price of the stock is $24.12 so you do have a gain but you would like a little more. If you can, you would like to sell the stock at $25.00.

Rather than wait all day and monitoring the stock market every 5 minutes, all you have to do is to place a "limit" order to sell your stock at $25.00. That means, if the price of the stock ever hits $25.00 for that day, your order to sell will be initiated and the sale will be made. If the stock does not ever reach that $25.00 mark, nothing will happen and you will still own the stock.

The same can be done on the low side. If you want to sell the stock at no lower than $23.00, you can place your order to sell if the stock goes down and hits $23.00. That way, you will still have a gain and you protect yourself from losing more if your stock continues to drop. Stock market investing is complicated for the beginner because of all the different terminology. Once you learn what all the words mean though, it is not as hard as you might think.

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