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When an individual investor uses the NASDAQ system, they get almost instant confirmations on all trades. Some prefer this method because it puts the investor in more control of the investing removing the middleman and bringing them a step closer to the market. With NASDAQ there is no need for the floor clerk or floor trader, the computer system handles these tasks. With NASDAQ, however, there is still a need for a broker. Investors do not have access to the exchange market. The broker accesses the electronic network and arranges the trading. They login to the market to find the buyer or seller depending on the customer’s order. With online investing, there are a variety of buy and sell orders that the individual investor can take advantage of in order to gain more control over the process. The most basic orders are market orders, limit orders and stop loss orders. A market order is the simplest of these orders. It instructs the broker to buy or sell the stock at the market price. These are the most inexpensive orders since there aren’t many brokerage fees for market orders.
Limit orders are used to direct the broker to trade a stock at a particular price. The transaction will not be carried out until the requested stock reaches that price. The benefit of using limit orders is that they allow the investor to control their entry to and exit from the market. The one drawback is that limit orders may have much higher brokerage fees than market orders. An investor may be better off watching the market and placing a market order when their stock reaches the desired price.
Stop loss orders live up to their names. They stop further losses from occurring on stocks that are declining in price. A stop loss order establishes a price trigger. At the point that a stock reaches that price trigger, the brokerage will sell the stock. A stop loss order can be seen as a form of insurance to protect the investor from big drops in stock.
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