Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Basic Stock Order Types To Help Minimize Your Risk -

Any time you are dealing with assets that see as much movement as penny stocks, it is important to use all possible market order types at your disposal to minimize risk. Unless a trader plans on being in front of their computer or on the phone with their broker all day, it is almost impossible to keep track of the rapid pace of penny stock changes. Even the most experienced and knowledgeable investors cannot say for sure which direction a stock will move in, so various order types are used to take advantage of and protect against unexpected turns in the market.

Limit Orders

This type of order has the broker enter or exit a position at a price you specify. The deal will only happen if that price can be attained. Limit orders let you know in advance the exact number you will buy or sell at, but brokers often charge higher fees than a standard trade so that can affect your bottom line.

Market Orders

These are the standard order that buys or sells the stock right then and there, at whatever the current price is. It is not guaranteed that you will get the price you just saw online or on television, but typically it will be close to that. These orders also typically carry the least amount of fees and transaction costs.


Stop Loss Orders

Designed to protect traders from drastic plunges, stop losses set a point below the current price that, if hit, will trigger an order to sell the position. If the stock increases, the stop loss does not come into play and you maintain your position.

Trailing Stop Orders

Similar to a stop loss, but sets the trigger in terms of percentage rather than a price point. This means these orders can be used to protect gains, because if the stock has a great upswing and subsequently falls by the percentage set in the order, a sale will be triggered and the gain will be realized.

Short Sell Order

These are bets that a stock will go down in price. With short orders, the trader is actually selling the stock and agreeing to buy the shares at a later date. If the price does in fact go down, the gain is the difference between the initial sale and the price when the trader buys back the shares to cover the trade. With penny stocks it can be difficult to short because the broker often lacks enough shares to lend traders in order to make the initial short sale. Many brokers also restrict short selling to stocks above a certain price, which can eliminate penny stocks.

When putting together a trading strategy, it is often the case that you must plan around the tools you can use. Stock market order types are a large part of your tools and when used correctly, can enable traders to let their winners run and cut losers short. It is important to know all restrictions and availabilities of your particular broker or platform in order to know exactly what can and cannot be done in any situation that arises.

About PennyTrader.com

 

PennyTrader.com is a financial and investor relations website committed to covering the microcap market space including Pink Sheets and OTC Bulletin Board and sub-$5 big board stocks. We we strive to provide you with the best stocks alerts in the market! We focus on OTCBB, OTC, penny stocks, sub-$5 big board stocks, and timely stocks picks and alerts. Our goal is to inform you of the HOTTEST stocks in the market before they move. Our staff has years experience in the stock market, and we are confident that you’ll be impressed with the results of our stock picks! If you wish to feature your organization on our website then you can contact us at publisher@pennytrader.com.

 

Forward-Looking Statement: This press release includes "forward-looking statements" within the meaning of the federal securities laws, commonly identified by such terms as "believes," "looking ahead," "anticipates," "estimates" and other terms with similar meaning. Although the Company believes that the assumptions upon which its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be correct. Important factors that could cause actual results to differ materially from the Company's projections and expectations are disclosed in the Company's filings with the Securities and Exchange Commission. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions.

 

PennyTrader.com is not a registered investment advisers or broker/dealer. PennyTrader.com makes no recommendation that the purchase of securities of companies profiled in this press release is suitable or advisable for any person or that an investment such securities will be profitable. In general, given the nature of the micro cap companies covered and the potential lack of an active trading market their securities, investing in such securities is highly speculative and carries a high degree of risk. For our full disclaimer go to http://www.pennytrader.com/disclaimer/