Stock Trading For Dummies

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One of the first things that you need to understand when you are starting out with stock trading for dummies are the different order types used in trading stocks.

1. Market Order - This is the most common and easy type of order.  A Market Order tells your broker to either buy or sell a certain amount of shares at whatever the current market price is.

2. Limit Order - Stock trading for dummies would recommend using limit orders the majority of the time.  A limit order tells your broker to either buy or sell a certain number of shares, only when they reach a specified price.  Perhaps a stock was trading at $20, and you either wanted to buy when they reached $15, or you wanted to sell when they reached $25.  Using a limit order you would be able to set these transactions up ahead of time, rather then constantly watching the ticker.  Most limit orders have a duration of 30 days.

3. Trailing Stop - A trailing stop is a method of selling your stocks to ensure that a quick decrease in value does not cause you to lose all of your investment.  Usually specificed in percentage points, a trailing stop will let your broker know that you would like to sell when the stock declines the specified percentage from the high point.  Say that you set a trailing stop at 10%, and the stock was valued at $20.  If the stock dropped $2 (10% of $20) to $18, your broker would sell.  If the stock went up to $25, it would take a decrease of 10% of that value ($2.50) in order to sell (at a price of $22.50).

This list is by no means all inclusive of the different types or orders.  Make sure you read more about stock trading for dummies before making any investment decisions.

This stock trading for dummies page is in no way endorsed, created, managed, or affiliated with Wiley Publishing, owners of the "For Dummies" series of books.