Methods of buying and selling of shares

Different methods of buying and selling of shares

Following are the two methods of buying and selling of shares in Indian share market.
Market Order
Limit Order
• Market Order
When you put buy or sell price of a stock at market rate or select market order option in trading terminal then the price get executes at the current rate of market. The market order gets executed immediately at the current available price. In market order the shares will get executed at the best current available price. Market order is used if you want to execute your order very fast and at available price. If you wish to buy or sell shares at any specific price then market orders is not suitable for you then have to go for limit order.Market order is for those who want to buy or sell immediately at the current available price.
• Limit Order
It’s totally different from market order. In limit order the buying or selling price has to be mentioned and when the share price comes to that price then the order will get executed. But here it’s not sure that the price will come to your limit order and the order get executes.
In other words in limit order the specific price is mentioned and trader or investor wait till the stock price reaches that price and once the stock price reaches that price then the order will get execute.
Day traders has to take very precaution while using limit order, especially who make use of margin amount In day trading, because you have to close all your transactions before 3:30 PM and if in case the price doesn’t reach to your limit order then your order will be open (pending) and then you have to go through the penalties. Importantly limit order and stop loss order are used together to minimize the risk.
• Stop Loss Order
Stop loss orders are used to reduce or to minimize the losses. This is very mportant term especially if you are doing day trading (intraday trading).Stop Loss order as the name indicates this is used to reduce the losses.In Stop loss order the trigger price has to be mentioned, by the trader, and once the price reaches the trigger price the order get executed with the best price available between the trigger price and the limit price.
For example - Suppose the trader bought the Reliance Industries at Rs 1000.So he puts the following order to protect his losses.The limit order of Rs 990 and stop loss trigger price at Rs 985 So if the reliance industries stock price starts falling and if it reaches 985 then his trade executes with the current market available price.
Note - The stop loss trigger price is placed below the limit price in buy order and above the limit price in sell order.

Important terms in share market

Open - The first price at which the stock opens when market opens in the morning.

High - The stock price reached at the highest level in a day.

Low - The stock price reached the lowest level in a day.

Close - The stock price at which it remains after the end of market timings or the final price of the stock when the market closes for a day.

Volume - Volume is nothing but quantity.

Bid - The Buying price is called as Bid price.

Offer - The selling price is called offer price.

Bid Quantity - The total number of shares available for buying is called Bid Quantity.

Offer Quantity - The total number of shares available for selling is called Offer Quantity.

Buying and selling of shares - Buying is also called as demand or bid and selling is also called as supply or offer. First selling and then buying (this only happens in day trading) is called as shorting of shares or short sell.

Share Trading - Buying and selling of shares is called share trading.

Transaction - One complete cycle of buying and selling of shares is called one transaction.

Squaring off - This term is used to complete one transaction. Means if you buy then have to sell (means square off) and if you sell then you have to buy (means square off).

Limit Order - In limit order the buying or selling price has to be mentioned and when the share price comes to that price then your order will get executed with the price mentioned by you.

Market Order - When you put buy or sell price at market rate then the price get executes at the current rate of market.The market order get immediately executed at the current available price.

Stop Loss Orders - Stop loss orders ("stops") are limits set by traders at which they willautomatically enter or exit trades - an order to buy or sell is placed in the market if price reaches a specified limit.