How to Place a Stock Order: Executing Your First Trade

Selling short can be done when you have a margin account with your broker. Essentially, you borrow shares of a particular stock and sell them, hoping that the stock will depreciate in value, leaving the difference between the selling price and eventual repurchase price in your pocket. Buying to cover is the term for that eventual repurchase; it closes out a "short position" in a stock.

But since we're talking about your first trade here, it makes sense to focus on buying stocks. Besides, selling short and buying to cover are more advanced investing topics that you'll definitely want to avoid until you're ready ("What Do I Need to Know About Shorting Stocks?").

5 Ways to Place Your Stock Order

There are five different types of stock orders that your broker will likely let you use. They are:

1. Market Order

2. Limit Order
3. Stop Order
4. Stop-Limit Order
5. Trailing Stop Order

Market Order: A market order is a request to purchase or sell a stock at the current market price. Market orders are pretty much the standard stock purchase order. One thing to keep in mind with a market order is the fact that you don't control how much you pay for your stock purchase or sale; the market does. This shortcoming can be met with a limit order.

Limit Order: This is an order that executes at a specific price that you set (or better) and can be open for a specific time period. While a limit order will prevent you from buying or selling your stock at a price that you don't want, if the price is way off base, the order will never execute. It's important to note that some brokers charge more for limit orders. Why? No execution means no commission.

Stop Order: This is a market order that is triggered once your stock reaches a specific target price, the stop price . Stop orders may also be called stop-loss orders, because they help investors put constraints on their losses.

Stop-Limit Order : This is identical to the stop order, except for the fact that a limit order is triggered once your stock reaches a specific target price.

Trailing Stop: Basically, this is a stop order based on a percentage change in the market price.