Southwest Management Group Order Types
The market order is the most frequently used order. It is the best order to use once you have made a decision about opening or closing a position. It prevents the customer from having to chase a market or trying to get in or out of a position. The market order is executed at the best possible price obtainable at the time the order reaches the trading pit.
The limit order is an order to buy or sell at a designated price. Limit Orders to buy are placed below the market while limit orders to sell are placed above the market. Since the market may never get high enough or low enough to trigger a limit order, a customer may miss the market if he uses a limit order. (Even though you may see the market touch a limit price several times, this does not guarantee or earn the customer a fill at that price.)
Stop orders may be used for three purposes: to minimize a loss on a long or short position; to protect a profit on an existing long or short position; or to initiate a new long or short position.
A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is touched, the order is treated like a market order and will be filled at the best possible price.
Stop Limit Order
A stop limit order lists two prices and is an attempt to gain more control over the price at which your stop is filled. The first part of the order is written like the above stop order. The second part of the order specifies a limit price. This indicates that once your stop is triggered, you do not wish to be filled beyond the limit price. Stop limit orders should usually not be used when trying to exit a position. If a customer does not give a limit price, then the stop price and the limit price are meant to be identical.
Stop Close Order (SCO)
The stop price on a stop close only will only be triggered if the market touches the stop during the close of trading. The disadvantage of this order is a fast market in the last few minutes of trading may cause the order to be filled at an undesirable price. It could, however, protect the customer from getting filled during adverse price fluctuations during the course of the day.