Since the emergence of online stock trading, you can now trade a stock without ever picking up the phone. In order to do it right, you should know some of the different options offered by the trading system. After logging in to your online trading system, when you want to buy or sell a stock you will be presented with several options of what type of order you want to place. There are options such as “market”, “limit”, “stop”, and “stop limit”.

The “market” option is useful when you want to either buy or sell a stock at the current market price. In other words, you want to trade the stock at whatever price the stock has at the moment you are placing the order.

If you want to trade a stock at a specific price, you should choose the “limit” option. For example, you have 1000 shares of ABC company bought at $10.00 per share. Right now the market price of the stock is $11.50, which means you already have a gain of $1.50 per share. You still hope the stock price will go to $13.00 where you will sell it happily for a total capital gain of $3,000.00.

This type of situation is where the “limit” option can be quite handy. Rather than wait around all day monitoring the stock price every 5 minutes, all you need to do is place a “limit” order to sell your stock at $13.00. That means, if the price of the stock ever reaches the $13.00 price for that day, your order will be automatically initiated and the trade will be done. On the other hand, if the stock never reach that $13.00 mark, nothing will happen and no trade will happen. You can then do the same thing the next day if you like.

A similar trading option can be done on the low side. If your stock price is dropping and you want to make sure you cut loss at a certain price, you can place your order to sell if the stock goes down and hits that price. That way, you will protect yourself from losing more if your stock continues to drop. If you plan ahead the cut loss price, it can help prevent you from making reckless decision based on emotions. When the stock market drops it is sometimes easy to panic and sell based on fear alone and not rational thought.

Investing in stock market can be complicated for a beginner because of the large number of terminology and options. Once you learn what everything means and start making some trades though, it won’t be as hard as you might think.