You can use the following trading techniques to improve your portfolio's. These compare to a market order, which is executed at the best price available at the time of the trade. If the market order is placed when the exchange is closed it is executed at the best price available when the next trading session opens.
To limit the execution price of a trade, you can place a limit order. This way, you can define a maximum price you will buy at, or a minimum price you will sell at. Remember that if nobody is willing to trade at your price, your order will not be executed. As long as the trade has not been executed, you can then cancel the order or change the limit price.
If you want to protect your profit on an open position, you can place a stop loss order. If the stock price drops below your stop loss price, your shares will be sold. For example, if you have bought a stock at $10 and the price has risen to $11, you could place a stop loss order at $10.50. If the price falls below $10.50 your selling order will be executed. You are not guaranteed $10.50 as an execution price, your trade is the next one done after the price falls to $10.50, so could be lower.
This is a refinement of the above technique. You set the stop loss at a variable price, at a discount to the highest price the stock reaches after you put in the trailing stop loss. For example, you could set the stop loss at 50 cents below the stock price. As long as the stock price rises, the stop loss price does, too. But the stop loss level never falls, so if the price drops by 50 cents at any time your stop loss is activated.
In our trading system, limit orders can be placed for 1 day or 60 days on the trade page. They can be cancelled at any time before execution. Currently, our system only offers stop-loss orders and does not offer trailing stop-loss orders.
These techniques can be used with all the trade types discussed in the article: Trade Types