Since 2003 commodities have enjoyed a massive bull market till 2008 when the entire stock market at large suffered. In the first quarter of 2009, the commodities and the stock market is roaring back. Are you ready to take advantage and maximize your profits this time? I’m sure you are. In this article, we will recap the different types of orders you can enter for commodities. You think this information is too basic? You would be surprised how many investors and traders are not familiar with the nuances of some order types. Lets get started.
The most popular and commonly used order types are-
1) Market: these are the easiest to use and understand and most of you will be familiar with it. When this order type is placed with a broker, the order is filled with the going price. Whats important to realize is that you have no guarantee of getting the best price with this type of order. One of the main times it makes sense to use this kind of order is to speed up the execution of the order. Sometimes after positive or negative news comes out about a company the stock surges and its possible that if you place other order types your
Market orders itself come in a variety of flavors – MOO (Market On Opening), MOC (Market On Close), MIT (Market If Touched) and a few others. The first two order types are intuitive because they simply are orders that are set to execute at the opening and the close of the trading day respectively. The MIC orders are basically market orders that get triggered when a certain price is reached. While they sound similar to limit orders, the difference here is that these orders are filled even if the price moves away from the chosen price point.
2) Limit: these are also simple to use and an effective way of buying or selling a commodity at a certain price. When you place a buy limit order your order is only filled at a price at or below than the limit price you selected. Similarly a sell limit order is only filled at a price at or above the limit price.
Like market orders, these limit orders come in a variety of flavors – stop close, stop limit and a few others. Stop limit orders have two prices on them. One price is the the regular stop order price, and the second one is the limit price. When the stop price is achieved, the limit requirement is canceled. The stop close orders come into play only near the close of a trading day. The order is ready for execution only if the market price reaches the stop price around the close. This is avoid the fluctuations due to the huge volatility during the the trading day.
3) OCO (Once Cancels The Other): this is not a commonly used order type. It is actually a combination of two different orders. It is a request to fill the order till one side is executed or the other is.
4) Fill or Kill: this is one of the rarer types of orders that is placed when an order needs to filled up in its entirety (usually when a large number of shares are part of the order) or canceled.
Different orders are used depending on the strategy involved. The main aim is the same – increase your profits and limit your profits. Think about your order before placing it.
Article Source: Articles Engine