Sunday, April 28, 2013

Orders to buy

I should mention that the rules for selling apply also to buying.  If the next earnings announcement is a week away or less, use a market order, else a limit order.

The one thing that's different is that there should be less urgency to act to initiate a position than to close one out.  You know what they say, the best way to double your money is to fold it in half and put it back in your pocket.

Wednesday, April 24, 2013

The best order form for selling a stock

So you've decided to sell, for whatever reason.  What form of order should you use?

Normally, I like to put in a limit order a little bit above the latest trade price.  There is a certain amount of natural fluctuation from day to day, or within a day.  If you put in a market order, you'll probably get the current price or maybe a little lower.  The limit order will in most cases get you more.

How much is more?  I'm thinking a little bit above the most recent day's high.

BUT if there is an earnings announcement due soon, then this misfires.  Stocks will go up if it's a good report and down if it's bad.  If a bad report, your limit order then won't be filled and you'll own the stock at a lower price.  If it's a good report, you'll get your price alright, but then it will trade higher and you'll miss out on that.

If there's an earnings report due within the next week, then use a market order to sell.  Yahoo! Finance will show the next earnings date and it's free.  I'm sure there are other sites as well.

Some folks advocate using a trailing stop order, so that if the stock continues to rise, they'll get in on that.  This has never worked well for me.  There are too many flash crashes these days.  Just yesterday a hacked AP tweet caused one.  So no more stop orders for me.