Many people imagine trading as sitting in front of a computer screen for hours on end, constantly analyzing and making decisions. And while it is a good idea to keep a close eye on the market, you don’t have to feel chained to your desk at all times if you are efficient with the trading techniques you use.
There are several tools that can help you trade while getting other things done. When combined, stop order and range order will help you avoid stress in case you have to step away from your computer in the middle of a trade.
Stop order is used for executing a trade whenever a stock hits the lowest price you’re willing to accept. If that price gets reached, you know with absolute certainty that the stock has gone against you and that you need to get out of the trade no matter what.
For example, if you bought a stock at $2/share, your stop order would be set to sell once it hits $1/share.
Now, there are two types of stop orders: stop limit and stop market. Stop limit is exactly what it sounds like. Using the example above, you can set your stop limit at $0.98. This way, the shares will be sold at a price no lower than $0.98, which may somewhat help manage the slippage.
Setting a stop market order, on the other hand, means the whole position will be sold off as quickly as possible once the stock price hits $1. Often the actual price you’re going to get for the shares will be lower than $1 (causing slippage in the process), but you will be out of the trade in a more timely manner.
Range order allows you to set up both a stop and a profit target. Say, you enter a trade at $2 per share. If you set up a range order at $1 as your stop and $3 as your profit target, the order will execute the trade on autopilot once either of the numbers is hit. Whichever one is reached first gets executed, and the other one gets canceled. This way, you can walk away from your station and let your trading plan automate accordingly.
Incorporating these two orders will allow you to trade in more flexible ways. As you develop a solid trading strategy and set your orders, you can take care of other important business. Day trading can be complex, but executing your pre-set trades doesn’t have to be.
These orders are also a fantastic tool that may help you stick to your plan. It is great for the traders who tend to change their strategy at the last minute. So if you know that you get nervous watching every uptick and downtick on the chart, using stop and range orders is an ideal solution for you.
Learn more about opening your account with Cobra Trading and take advantage of the day trading tools that we offer today.