Buying and Selling With Discipline

Buying stocks appears fairly straightforward at(showing the price you paid for the stock) is
first glance, however there are several points youdelayed significantly. This makes it extremely
should consider before blinding placing your firstdifficult to judge what a "fair and accurate" price
trade to buy or sell a stock. Following is a briefis and/or when your order should have been
outline of points to consider.First and foremost,executed. It also opens you up to possible foul
you need to understand that stocks are sold toplay when it comes to how your order is
you at one price and bought back at a slightlyprocessed and/or handled. As such, unless you
lower price. This difference is called "the spread".are dealing with a fairly orderly market, we
And while the spread has generally decreasedsuggest using what are called limit order.A limit
over the years, you are still taking a hit when youorder works just like you might think. It is an
purchase a stock (assuming you should want toorder with a limit price attached to its execution.
turn around and sell right away). The bid price isWhen you place your order, you specify a limit to
the price the market will pay for a stock whenthe price you'll pay. While limit orders are usually
you go to sell it, while the ask price is the priceexecuted after market orders, they do provide a
quoted to those who wish to purchase the stockhigher level of protection against over paying, etc.
from the market. Nothing says you cannot try toAdditionally, we feel they are a fine method to
buy at the bid and sell at the ask, but this willuse when trying to take up a position at a lower
generally delay your execution.On the topic of bidthan the market price. You should keep in mind,
and ask prices, you should note that there is ahowever, there are two types of limit orders, a
corresponding "size" which relates to how deepstop limit as well as a market limit. A stop limit
the orders run on the bid and/or ask size at anyorder is an order which becomes a stop (such as
given price. As an example, you may have 100a stop loss) once the price is reached. Keep in
people trying to buy a stock at a specific price,mind with this sort of order, the market can pass
while only 10 are trying to sell. This directlyright by you, where as with a normal limit order
impacts how much stock is available at any given(which basically turns into a market order once
bid or ask price. Once the orders to buy or sell ahit) you stand a better chance for not only
stock at a given price are filled and/or canceled,execution, but seeing an improvement on your
the price adjusts according to the remainingexecution price. This is because once your market
orders - either at higher or lower prices. If thereorder is set, the market may move in your favor
is a 'void' of orders at any given level in theduring execution, but you will never pay more
market, a stock is said to "free fall" or "gap" tothan your limit. Limit, stop and market orders
wherever there are buyers or sellers. Keep inapply directly to both buying and selling of
mind as well, how this area of pricing is handled isstocks.Sometimes being in cash gives you the
sometimes dependent on where your stockbest strategic position from which to trade, and
trades. On the NYSE, for example, bid and askthis is often an overlooked fact of daytrading.
sizes are displayed by a market specialist whoseRemember, you can't take advantage of market
job it is to ensure an orderly market. However,dips if you are already in the market! In my view,
on the Nasdaq, multiple market makers my line upit's better to be out of the market more for day
at different prices advertising to the market totrading than in the market. This will allow you to
buy or sell at different levels. Detailed informationget in and out with profits quickly and be on the
regarding where a specific market makersidelines should dips occur. It also drastically
(generally a large brokerage firm) will buy or sell areduces the risk to your capital as compared to
given stock is provided via Level II data.Next, youjust sitting in stocks that aren't moving and/or
should understand there are several differentholding trades for excessively long periods of
types of orders that can be placed to buy or selltime. Try to be out of the market more with
a stock. The most common is called a "marketyour trades and in the market more with your
order". This means buy or sell at the marketinvestments (as long as they are good
price. However, keep in mind once this type ofinvestments of course).
order is placed, you are nearly powerless in yourAbove all else one of the most important and
control of the price paid should the market makemost widely over looked aspects of being a
a sudden move. In a very active market, you cansuccessful day trader is working on your personal
also run into situations where your confirmationlife and how you conduct yourself.