Order Types

The order type an investor places on his trade can have a big influence on the outcome of the trade. Orders in business are simply instructions that brokers use to determine either to enter or exit a position.

The order type an investor places on his trade can have a big influence on the outcome of the trade. Orders in business are simply instructions that brokers use to determine either to enter or exit a position. Trading via this method is not always efficient; although it might seem very simple to just push the “buy” button when entry conditions are met and push the “sell” button when it is time to exit.

In all of this, the investor tends to suffer from what is known as slippage. Slippage is the difference in price at which the trader was expecting to the price at which the trade was filled in and this can vary in fast moving trades and slow moving trades.

The trader can choose certain trade types that allow for the specification of the price of exact prices for trades which can help eliminate or reduce some of the risks that are associated with slippage.

Know the meaning and differences between the available order types can help traders choose the right choice. 
1.    Long Trades: This is a trade that is entered in hopes of expecting profits from rising prices. Losses in this type of trade can be considered as limited because prices can only go as low as $0 if the trade moves in the wrong direction.

2.    Short Trade: This type of trade is usually entered with the expectation of profiting from a falling market. Losses from short trades are considered unlimited because prices could continue rising continually and indefinitely.

Other worth of mention are the
•    Market orders:  This instructs the trader to buy and sell at the best price that is currently available in the market.

•    Limit orders: In this type of order, a trade can only be executed at a specified limit of price. It is an order to buy and sell at a specified price in the market

•    Stop orders: Here, orders become active only after a specified price level has been reached. Stop orders act as a trigger for market or limit order. A buy stop order places prices above the market, while a sell stop order places prices below the market.