Chaptere 14: The Basics of Trading a Stock: Know Your Orders

Question 1

A _______________ is the most basic type of trade. It is an order to buy or sell immediately at the current price.

Answer 1

market order

Question 2

Typically, if you are going to buy a stock, then you will pay a price at or near the posted ____.

Answer 2

ask

Question 3

If you are going to sell a stock, you will receive a price at or near the posted ______.

Answer 3

bid

Question 4

are popular among individual investors who want to buy or sell a stock without delay.

Answer 4

Market orders

Question 5

do not guarantee a price, but they do guarantee the order’s immediate execution.

Answer 5

Market orders

Question 6

sometimes referred to as a pending order, allows investors to buy and sell securities at a certain price in the future.

Answer 6

limit order

Question 7

In effect, a __________ sets the maximum or minimum price at which you are willing to buy or sell.

Answer 7

limit order

Question 7

This type of order is used to execute a trade if the price reaches the pre-defined level; the order will not be filled if the price does not reach this level.

Answer 7

limit order

Question 8

four types of limit orders

Answer 8

1. Buy Limit
2. Sell Limit
3. Buy Stop
4. Sell stop

Question 9

an order to purchase a security at or below a specified price.

Answer 9

Buy Limit

Question 10

an order to sell a security at or above a specified price.

Answer 10

Sell Limit

Question 11

an order to buy a security at a price above the current market bid.

Answer 11

Buy Stop

Question 12

an order to sell a security at a price below the current market ask.

Answer 12

Sell Stop

Question 13

to buy becomes active only after a specified price level has been reached

Answer 13

stop order (known as the stop level).

Question 14

is also referred to as a stopped market, on-stop buy, or on-stop sell, this is one of the most useful orders.

Answer 14

Stop-Loss Order

Question 15

This order is different because, unlike the limit and market orders, which are active as soon as they are entered, this order remains dormant until a certain price is passed, at which time it is activated as a market order.

Answer 15

Stop-Loss Order

Question 16

These are similar to stop-loss orders

Answer 16

Stop-Limit Order

Question 17

There are two prices specified in a stop-limit order: .

Answer 17

1. stop price
2. the limit price

Question 18

which will convert the order to a sell order

Answer 18

stop price

Question 19

Instead of the order becoming a market order to sell, the sell order becomes a limit order that will only execute at the limit price or better.

Answer 19

Stop-Limit Order

Question 20

This type of order is especially important for those who buy penny stocks.

Answer 20

all-or-none order

Question 20

This can mitigate a potential problem with stop-loss orders, which can be triggered during a flash crash when prices plummet but subsequently recover.

Answer 20

Stop-Limit Order

Question 21

ensures that you get either the entire quantity of stock you requested or none at all.

Answer 21

all-or-none order

Question 22

mandates that whatever amount of an order that can be executed in the market (or at a limit) in a very short time span, often just a few seconds or less, be filled and then the rest of the order canceled.

Answer 22

IOC order

Question 23

True or False

If shares are traded in that “immediate” interval, then the order is canceled completely.

Answer 23

False

If no shares are traded in that “immediate” interval, then the order is canceled completely.

Question 24

This type of order combines an AON order with an IOC specification;

Answer 24

Fill or Kill (FOK)

Question 25

in other words, it mandates that the entire order size be traded and in a very short time period, often a few seconds or less. If neither condition is met, the order is canceled.

Answer 25

Fill or Kill (FOK)

Question 26

This is a time restriction that you can place on different orders.

Answer 26

Good ‘Til Canceled (GTC)

Question 27

will remain active until you decide to cancel it.
Brokerages will typically limit the maximum time you can keep an order open (or active) to _______.

Answer 27

Good ‘Til Canceled (GTC); 90 days

Question 28

This means that after the end of the trading day, the order will expire. If it isn’t transacted (filled) then you will have to re-enter it the following trading day.

Answer 28

Day

Question 29

sometimes called a profit target Execution of a ____________ closes the position.

Answer 29

take profit order

Question 30

is intended to close out the trade at a profit once it has reached a certain level.

Answer 30

take profit order

Question 31

This type of order is always connected to an open position of a pending order.

Answer 31

take profit order

Question 32

True or False

Not all brokerages or online trading platforms allow for all of these types of orders.

Answer 32

True

Question 33

Who are you?

Answer 33

A CPA, RMT, MD, ATTY, MBA, & has 3 certifications is belt (CFMP, CAEA, CATA)