Okay so you’ve signed up for a trading platform, you’ve put some money into the account and now you’re ready to trade. What kind of order do you place?
Okay so you’ve signed up for a trading platform, you’ve put some money into the account and now you’re ready to trade.
When you buy or sell shares via a broker, you’ll have two options: a market order or a limit order. And it’s all about timing.
Let’s look at the difference.
A market order is an order to buy or sell a share immediately after the request is placed. That means right here, right now, folks.
Generally, you will use a market order if you wanna get in on the action ASAP - or sell out of it ASAP. This means you’ll be buying or selling at the live price of that share on the share market.
A limit order is an order to buy or sell a share when it hits a certain price - aka the limit.
So, imagine you want to buy 50 Telstra shares…but you want to do so at $2 per share. You would set a ‘limit’ order at a price of $2 per share.
If Telstra’s share price drops to $2 per share, your order will be executed. If it doesn’t? Your order will never be executed. So, be wary of setting a strike price that’s too low.
If the trade doesn’t execute, you can always go back in and either set a new limit order at a different price, or use a market order to execute the trade ASAP.
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