I have been referring to the huge volumes of information in the internet. I have started to get different concepts regarding trading .However I was confused regarding some concepts as two different resources were pointing to two different directions. Finally I think I will get the right answer out here. Please help me regarding some of my confusions. What are market orders and limit orders which method of trading is more convenient? Which method can be used in order to limit risk and to achieve maximum gain?
With a market order, you enter the market on whatever price is possible, you say: I want to be in. You place a market order on the market and the first one that takes your order you are filled and you are in the market. Meaning you could end up paying more than you initially planned too.
With a limit order you give an exact price when you want to make a deal, you say, I want to deal at price X and when there is somebody willing to deal with you at price X you are in the market, otherwise your market remains there, sitting without being filled.
Different trading strategies are for different traders, there is no exact fit or guarantee, one trader could make a million $ with a trading system while another trader with the exact same system would lose a million $.
Welcome to trading, the most difficult endeavor on the planet to make a buck or two.
I came through the article where the author has stated that there are 3 types of account. It stated that the brokerage houses offers cash account, margin account and option account. What type of account must be posses by me in order to trade? Is there any plus and minus of different accounts? Which will be the most suitable for beginners like me? It stated that margin account has more added benefits along with some complications and lengthy procedures. Is that true?
Those are actually refering to three types or sub-categories of a stock/equities accounts.
A margin account usually refers to a Pattern Day Traders Account.
Pattern Day Trading Accounts: Based on FINRA and NYSE day trading rules, any account that places 4 day-trades in a 5 trading day period is permanently deemed to be a “Pattern Day Trading” account. Pattern Day Trading Accounts must maintain a minimum daily equity balance of US $25,000. If the account balance falls below $25,000, trading is restricted to closing transactions only until the account balance is increased to $25,000.
A cash is what I would refer to as a Non Day-Trading Account. (401k's and IRA also fall here)
Non-Day Trading Accounts: Non-Day Trading Accounts (an account that has never placed 4 day-trades in a 5 trading day period) must maintain a minimum daily equity balance of at least $5,000. Non-Day Trading Accounts are restricted to 3 opening transactions per day, less the number of day trades made in the preceding 4 trading days. For example, if you have made 2 day-trades in the preceding 4 trading days, you will be permitted to place 1 new opening transaction (Buy or Sell Short) on the current day. You will still be able to place as many closing transactions (Sell, Cover) as you would like on the current day. Based on FINRA and NYSE day trading rules, an account which places 4 day-trades in any 5-day period will be deemed to be a “Pattern Day Trading” account permanently. See “Pattern Day Trading Account” requirements above
An options account is one of the two types of accounts above, with the additional abilitiy to trade options.
But then there are another 5 categories here..
I would suggest you find the nearest Scott Trade office and sit down face to face and ask as many questions as you can possibly can. DO NOT Sign up for an Account!!! but suck out as much information as you can in that meeting. It will be a start to help you better understand what your reading on the net.
You can trade with all three of them, depending on what and how you want to trade. I am sure the author explained the differences in the article? Maybe you should try to read through it again and then come back with specific questions.
A quick Google search will also answer many of your questions. Click here to see an example of how easy this is.
Your question cannot be answered directly. It's like asking whether you should use a Mac or a PC to achieve the best performance--that will depend entirely on your needs and your methods.
When price is moving higher, for example:
+ Placing a buy market or buy stop for a breakout will definitely get you into the trade. On a strong move up, this may be wise, as price may retrace little on its way up.
+ On the other hand, quite a few times traders will buy a breakout with a buy stop, only to have price reverse and test a lower level, and they will either get stopped out or take lots of heat on the trade. In this case, a patient trader with a limit order will come out better as he will get a better price, and can have a tighter stop loss.
So in different cases, different types of orders can be beneficial. Your gauge of how price is moving should tell you what to do.
The following user says Thank You to josh for this post:
I am looking for the best suitable time to trade? What is the most feasible and appropriate time in a day to trade? is it while the stock exchanges are getting prepared to be closed or the time when they have just started to trade ?
It is said that there is more rate of return in future trading. However there are risks also but what is different risk involved in future trading? Is it good for new beginners like me to start trading with future commodities or there’s other better option for me? Help?