What Is Good for Day Market Order – Trading Tutorial

The process of trading securities comprises pacing the market orders, as you might already know. But what is good for day market order? 

There are several types of stock market orders, each of which can have different consequences on the price or time of execution. It’s important to understand the different types of orders before placing any trades.

Here’s what to remember to avoid unpleasant surprises. Before we see what is good for day market order, let’s look at how stocks work and how to get into stocks.

How Do Stocks Work? Bid, Ask, and Spread

The Stock Exchange operates like any market, with investors selling shares expecting price declines and buying anticipating increases. Prices fluctuate daily, driven by bid, ask, and spread. Understanding these terms is crucial for trading. 

Transactions entail buyers bidding maximum prices and sellers offering minimums, both specifying share quantities. Orders are usually queued, with transactions often completed within the trading day.

• Spread

The spread, the difference between bid and ask prices, varies widely. It can range from significant gaps to as little as a penny. Generally, highly liquid securities, traded frequently at high volumes, have narrower spreads.

• Day trading

Day trading is all about timing your trades so that you buy an asset when it is trending up, and sell it a few hours later when it is trending down. 

You never want to hold a position overnight, as this can increase your risk of losses. Meticulous, expert in graphic analysis, the day trader appreciates devoting an entire day to a single trade.

How to Get Into Stocks?

To start investing in stocks, open an account with a traditional bank, online bank, or online broker. Online banking offers cost savings over traditional methods. 

Ensure selected trading platforms comply with your country’s regulations. Also, understand how to cancel orders to maintain investment control.

What Is Good for Day Market Order – Trading Tutorial

In the Internet age, placing a stock market order is disconcertingly easy. But what is good for day market order?

Despite everything, before entering the arena, understanding how to buy and sell orders work remains an essential step to making the right choices and thus avoiding very unpleasant surprises.

Some orders guarantee you the execution market price of the transaction, others the volume of securities trading price, etc. It is essential to identify your objective to place the right good for the day market order.

Limit Order: Control Your Operation’s Price

The limit order, often used as a day order, provides a high level of security by allowing investors to set a maximum buying price or minimum selling price. 

However, it’s crucial to establish a realistic price to ensure execution. In illiquid markets, this order may split up or fail to execute, emphasizing the importance of setting appropriate parameters when placing an order to buy within a specific trading day.

Market Order: Swift Exchange of Securities

With priority over other orders, the market order facilitates immediate buying or selling of securities without price conditions, offering no price control. 

This order executes promptly upon finding a buyer or seller. While ideal for quick transactions, exercise caution with volatile securities as execution control is limited.

The order at the best limit: for a fast transaction

This order is executed at the best offer (if you are buying) or at the best ask (if you are selling). It, therefore, makes it possible to sell or acquire liquid securities quickly.

Please note: There’s no price guarantee, and your order may be partially executed. Unexecuted securities will be converted into a “limit price” order at the price of the initial execution.

Trigger orders: to protect against a trend reversal

Also known as “stop” orders, trigger orders come in two types:

• Threshold Order

  Primarily to limit losses, this order sells if the market falls below a set threshold, triggering a “market” order for priority execution. Exercise caution, particularly with illiquid securities or high volatility, as control over execution is limited.

• Trigger Range Order

  Designed to manage operation costs, this order type involves setting a secondary limit alongside the trigger threshold. 

  Upon reaching the threshold, it’s triggered as a “limit” order, enabling partial execution as desired by the investor.

What are Good-Til-Canceled (GTC) Orders?

GTC (Good-til-canceled) orders remain active until executed or cancelled. Investors can set bid or ask prices above or below current levels for continuous order advancement. Also, GTC orders enable traders to specify entry or exit levels.

Automatic cancellation occurs in specific scenarios:

•   Corporate actions like stock splits, stock exchanges, or distributions.
•   Dividends exceeding 3% of the previous day’s closing price.
•   Inactivity on the IB account for 90 days.

What should be checked before placing a day market order?

A few checks are necessary before placing a stock market order to ensure that it can be executed and under what conditions.

Checking Order Placement Channels Before Market Closes

Before the trading day concludes, review the order placement channels accepted by your financial intermediary, which may encompass email or online platforms, each with its pricing and terms. 

Ensure to consult your account agreement for approved transmission methods. Failure to utilize accepted channels may lead to non-execution of orders. 

While electronic channels are favored, alternative methods are often available, especially in case of technical issues, as outlined in the account agreement.

Verifying Order Validity

Verify the validity period of your order, typically set to “day” validity by default, meaning it’s active only for the current trading session. 

However, orders can also have fixed-date or revocable validity, impacting their execution likelihood. Refer to your account agreement for authorized validity periods and monitor order execution to make necessary adjustments.

Consider Execution Venues

Consider the possible execution venues for your stock market orders, such as regulated markets like Euronext or multilateral trading systems, each subject to different regulations. 

Your intermediary is obligated to achieve best execution for your orders, meaning they must choose the most favorable execution venue based on transaction cost. 

If execution occurs outside a regulated market, your intermediary must inform you accordingly. 

Conclusion

Understanding these factors will enhance your decision-making in future trades. It all depends on you! Good luck!