How to Place a Market and Limit Stock Order Online

This essential step by step guide to placing an online stock buy order can save you a considerable amount of time and possibly even money by simply gaining a basic understanding of the distinct difference between a limit and market order and how the bidding process actually works. Which order should I use? A Market? Limit? Day Order? Good til' Canceled? All are very important and relevant questions that need to be answered prior to logging on to your account and inputting data which may have unintended consequences for the novice or even professional investor.

Let's assume you've already had the pleasure of filling out the appropriate application and your discount brokerage account is now open, funded, and ready to go. We'll also assume you've invested the required time to research potential "BUY" candidates using your new Discount Broker's wealth of interactive online tools and are now ready, willing, and able to begin building a mid to long term growth oriented portfolio, or to start participating in the fast and sometimes frenzied paced world of short term day trading.

HOW TO PLACE AN ONLINE BUY ORDER

• Limit Buy Order

If your not familiar with a "Limit Order", it's a bid placed for a stock, option, or other security with for specified price. ( In the following examples the orders placed will be for "Stock" ). You set the exact price your willing to pay and not a penny more ( For instance $20.25 ). If the price indicated is not reached for the duration of the open order, it will not be executed and you must adjust the limit price accordingly to buy the stock.

With a standard online discount brokerage account there is a designated space or several spaces for pertinent data to be input. Usually there is a separate box for the type of transaction either a buy or sell, another space to type in the stock name and or security ticker symbol, the desired limit price, and finally the time duration of the order, whether it's "Good til' Canceled" ( Can remain open for weeks or even months ) or a "Day Order" ( Valid for the entire trading day from market open to close ).

All spaces must be filled in with the appropriate data or the order will not be processed. Once all the boxes are completely filled in, a designated "BUY" button needs to be depressed ( Your brokerage account might have a different way to trigger the electronic order process ). Before clicking the "BUY" button I would suggest that you double and even triple check all the specific terms of your order, especially the PRICE and QUANTITY (Number of Shares). If a mistake is made, such as inputting the wrong price or number of shares and the order is executed before the changes can be made, you've just entered into a legally binding contract which in most cases will be very difficult if not impossible for you to rescind or cancel unless you can prove an electronic malfunction occurred with the brokerage firms software, and even then it will probably be extremely difficult to amend or cancel the transaction. - Always double check your order before "Clicking" -

• Market Buy Order

Unlike a limit order where an exact price your willing to pay is specified, a market order allows for cost flexibility. There is no specific price indicated and the order will be executed at the next available "Market" price unless an unforeseen incident occurs such as a halt trading. The market order typically results in a transaction that is executed much faster and more efficiently. The buyer essentially agrees to pay the next price a seller is willing to sell the same amount of shares for. - There is no price protection. -

Placing a market order is the exact same process as a limit order only it takes significantly less time to be filled unless the security your interested in purchasing is halted or removed from trading just prior to placing the order which is a possibility however it doesn't happen that often.

As briefly mentioned above, a limit order gives you price assurance which allows complete control over the cost aspect of the trade ( You know precisely how much it will cost before submitting the order ).A market order is the exact opposite, your allowing the stocks trading activity to control and dictate the final transaction price point which can work in your favor or against. Something to consider very carefully before placing the order especially if the exchanges are experiencing unusually volatile conditions which can potentially lead to a magnified up or downside bias. But if the stock seems to be at the genesis of a sustained breakout to the upside following a robust earnings report or other influential news, and time is of the essence, paying a little more for the shares might just pay off in the end.

_{NOTE: In a fast moving market the difference between a real time or delayed stock quote and the buy order execution price can be substantial}

• Commission Schedule

There are certain advantages to both types of orders, for instance if swift virtual guaranteed execution verses price protection and cost management is your main goal then the market order might suit your needs best. If price protection is your main objective, even if it means the possibility of missing an opportunity to buy shares at that point in time due to non execution, a limit order might be the way to go. Discuss the differences between the two orders with your advisor.

Typically a discount brokerage firm will charge less for a market order due to swift execution. In contrast, a limit order can stay on the specialists book for an extended period of time which means your data must be maintained and monitored by either a professional or computerized tracking system until it's executed or canceled, hence more overhead costs passed on to the customer. - Some discount brokerage firms offer special commission rates and or fee schedules for active investors -

• _{Once the order is successfully executed, standard procedure is notification from the Brokerage Firm via E Mail or other designated method of communication to inform the customer of a successful order execution. You should also receive either a hard copy or online version of the "Confirmation Statement" to be used for tax purposes. -}

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