Let us learn about different methods of buying and selling of shares in stock market for beginners learning series.
Following are the two methods of buying and selling of shares in Indian share market.
1. Market Order
2. Limit Order
3. Stop Loss Order
When you put buy or sell price of a stock at market rate
or select market order option in trading terminal then the
price get executes at the current rate of market. The market
order gets executed immediately at the current available
In market order the shares will get executed at the best current available price. Market order is used if you want to execute your order very fast and at available price.
If you wish to buy or sell shares at any specific price then market orders is not suitable for you then have to go for limit order. Market order is for those who want to buy or sell immediately at the current available price.
Itís totally different from market order. In limit order
the buying or selling price has to be mentioned and when the
share price comes to that price then the order will get
executed. But here itís not sure that the price will come to
your limit order and the order get executes.
In other words in limit order the specific price is mentioned and trader or investor wait till the stock price reaches that price and once the stock price reaches that price then the order will get execute.
Day traders has to take every precaution while using limit order, especially who make use of margin amount In day trading, because you have to close all your transactions before 3:30 PM and if in case the price doesnít reach to your limit order then your order will be open (pending) and then you have to go through the penalties.
Importantly limit order and stop loss order are used together to minimize the risk.
Stop Loss Order
Stop loss orders are used to reduce or to minimize the
losses. This is very important term especially if you are
doing day trading (intraday trading). Stop Loss order as the
name indicates this is used to reduce the losses.
Note - The stop loss trigger price is placed below the limit price in buy order and above the limit price in sell order.