A market order is an order to buy/sell a stock at the most profitable ask/bid prices prevailing at the time the order hits the exchange floor. A market order implies the investor wants the transaction completed quickly at the prevailing price. Example: I read good reports about Shoppers Drug Mart and I’m certain the stock will go up in value. When I call my broker and submit a market buy order for 100 shares of Shoppers, the prevailing asking price is 40. Total cost for my shares will be $4,000 + commission.
11(b). A limit order specifies a maximum price that the ...view middle of the document...
Example: I expect Shoppers to go to $32 - I would sell it short at $40 and expect to replace it when it gets to $35.
11(d). A stop-loss order is a conditional order whereby the investor indicates that he wants to sell the stock if the price drops to a specified price, thus protecting himself from a large and rapid decline in price. Example: I buy Shoppers at $40 and put in a stop loss at $37 that protects me from a major loss if it starts to decline.
A market is a means whereby buyers and sellers are brought together to aid in the transfer of goods and/or services. It generally has a physical location but does not necessarily have one. Secondly, there is no requirement of ownership by those who establish and administer the market - they need only provide a cheap, smooth transfer of goods and/or services for a diverse clientele. A good market should provide accurate information on the price and volume of past transactions, and current supply and demand. Clearly, there should be rapid dissemination of this information. Adequate liquidity is desirable so that participants may buy and sell their goods and/or services rapidly, at a price reflecting the supply and demand. The costs of transferring ownership and middleman commissions should be low. Finally, the prevailing price should reflect all available information.