Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you place a stop or limit order, you are telling your broker that you don't want the market price (the current price at which a stock is trading), but that you want the stock price to move in a certain direction before your order is executed.
With a stop order, your trade will be executed only when the security you want to buy or sell reaches a particular price (the stop price). Once the stock has reached this price, a stop order essentially becomes a market order and is filled. For instance, if you own stock ABC, which currently trades at $20, and you place a stop order to sell it at $15, your order will only be filled once stock ABC drops below $15. Also known as a "stop-loss order", this allows you to limit your losses. However, this type of order can also be used to guarantee profits. For example, assume that you bought stock XYZ at $10 per share and now the stock is trading at $20 per share. Placing a stop order at $15 will guarantee profits of approximately $5 per share, depending on how quickly the market order can be filled.
Stop orders are particularly advantageous to investors who are unable to monitor their stocks for a period of time, and brokerages may even set these stop orders for no charge.
One disadvantage of the stop order is that the order is not guaranteed to be filled at the preferred price the investor states. Once the stop order has been triggered, it turns into a market order, which is filled at the best possible price. This price may be lower than the price specified by the stop order. Moreover, investors must be conscientious about where they set a stop order. It may be unfavorable if it is activated by a short-term fluctuation in the stock's price. For example, if stock ABC is relatively volatile and fluctuates by 15% on a weekly basis, a stop loss set at 10% below the current price may result in the order being triggered at an inopportune or premature time.
A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. For instance, if you want to buy stock ABC, which is trading at $12, you can set a limit order for $10. This guarantees that you will pay no more than $10 to buy this stock. Once the stock reaches $10 or less, you will automatically buy a predetermined amount of shares. On the other hand, if you own stock ABC and it is trading at $12, you could place a limit order to sell it at $15. This guarantees that the stock will be sold at $15 or more.
The primary advantage of a limit order is that it guarantees that the trade will be made at a particular price; however, your brokerage will probably charge a higher a commission for the limit order, and it's possible that your order will not be executed at all if the limit price is not reached.
A pending order is placed to execute in the future at a particular price. There are 4 basic types of Pending Orders:
Types pf pending orders
We differentiate between stop orders and limit orders. Stop orders are placed in anticipation that the price movement will carry on in the same direction after reaching your Stop price. Limit orders are placed in anticipation that the price movement at a certain point will reverse in direction.
For example, you would place a BUY Stop, if you believe that when the price rises and hits a certain price, it will continue to rise.Therefore you would place a Buy Stop ABOVE where the market is currently.
You would place a SELL stop if you believe that after the price falls to your price, it will continue to fall. Therefore you would place a Sell Stop BELOW the current market
For example, you would place a BUY Limit, if you believe that when the price falls to a certain level, it will change direction and start to rise. Therefore you would place a Buy Limit BELOW where the market is currently.
You would place a SELL limit if you believe that after the price rises and hits your price, it will then start to fall. Therefore, you would place a Sell Limit ABOVE the current market price.
How to place a pending order in NAGA Trader?
Basically all the calculations stay the same like when you open a trade. The only difference when placing pending orders? I can set the price I want to enter the market.
Whenever I change the Entry Price, the Profit and Risk levels change accordingly. So a pending order is basically not more than just the possibility to adjust the entry price. The underlying calculations remain the same.