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Useful brokerage terms to keep in mind

To give you a better perspective on the qualities and potential risks of various kinds of brokerage orders, here are brief explanations of the most common types Vanguard Brokerage Services® typically handles. Of course, no method can ensure a profit or protect against a loss.

A market order is an order to buy or sell a stock or ETF at the best price available at the time the order is received in the marketplace. This type of order may be appropriate if you want your trade to execute immediately. Execution price is not guaranteed, and in volatile markets the price you receive can vary significantly from the one that is quoted. Securities may open significantly higher or lower than their previous close, and intraday changes in the market may affect the price you receive and the total cost of your trade. You can place a market order for the current day's trading session only.

A limit order is an order to buy or sell a stock or ETF at a specified price (the limit price) or better. This order may be appropriate for investors who wish to set a limit on the price of their purchase or sale. With a limit order, you specify the maximum price you are willing to pay to buy a security or the lowest price you are willing to accept to sell. Execution is not guaranteed because the market price may not go as low as your buy limit price or as high as your sell limit price. Also, there may be other orders at the same limit price, and if there aren't enough shares available to fill your order, the price of the security could move away from that price before your order is able to execute. Orders may be placed as day orders or good-till-canceled. A day order expires at the end of the current trading session unless the order executes or you change or cancel it. A good-till-canceled (GTC) order remains in effect for 60 days unless it executes or you change or cancel it.

A stop order triggers a market order for a stock or ETF once your stop price has been achieved and can be used to help protect gains or curb losses. But remember that your execution price is not guaranteed. In fast market conditions, prices can fluctuate quickly and your execution price may differ significantly from your stop price and the prior day's closing price. A buy stop order is entered at a price above the current market price, while a sell stop order is entered below the current market price. Orders may be placed as day orders or good-till-canceled.

Example: You own a stock that is currently trading at $18. You decide to sell the stock at market price if its price falls to $15. Therefore, you place a sell stop order with a stop price of $15. Once the stock drops to $15 or lower, a market order is triggered. Note that the market price may vary from the stop price. Using the same example, if the security closed on Monday at $18 and then opened at $12 on Tuesday, your shares would be sold immediately around the $12 price.

A stop limit order is an order to buy or sell a security at a limit price or better once a specified price has been achieved. A buy stop limit order allows you to buy a stock or ETF at no higher than the limit price after your stop price has been achieved. A sell stop limit order allows you to sell a stock or ETF at no lower than the limit price after your stop price has been achieved. Keep in mind that it is possible for the stop price to trigger without the order executing. Orders may be placed as day orders or good-till-canceled.

Example: You own a stock that is currently trading at $18. You decide to sell the stock if its price falls to $15, but you don't want to sell it for anything less than $14.50. Therefore, you could place a sell stop limit order with a stop price of $15 and a limit price of $14.50. Once the stock drops to $15 or lower, a limit order is triggered. However, the order will only execute at or above your $14.50 limit price.

Can I change or cancel an order once I place it?

You may attempt to change or cancel any limit, stop, or stop-limit order that has not yet executed. Market orders usually cannot be canceled or changed during market hours because they execute immediately. Keep in mind that orders may have executed, but delays caused by market conditions may not allow the order's execution to show. In such cases, the execution will still be honored.

NOTES:

  • All investments are subject to risks. Past performance is no guarantee of future results.
  • Vanguard Brokerage Services is a division of Vanguard Marketing Corporation, Member FINRA.
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