Order additives or commercial options are designations, which specify a security order more accurately and place certain conditions, under which this order to be implemented are. There is generally the distinction between unlimited and limited orders. Unlimited orders are implemented immediately; limited only if the course the indicated upper or lower bound (limit) over or falls below. In addition one differentiates between purchase and Verkauforders. Possible commercial options are:

• Definition limits
• Definition of the point of run time
• Definition whether the order may be split or not (Fill Or Kill, Immediate Or cancel)

Limitorders

A limit (English: Border) and/or a limit order is a special order additive with a customer order to the purchase or sales of stock exchange-moderately acted market articles (securities).

If a client calls a price (course) during the placing of order (order distribution), which may not be exceeded, it concerns a purchase limit order ("buy limit order").

If a client calls a price, which may not be fallen below during the order distribution, it concerns a sales limit order ("sell limit order").

A limit order is therefore to be sold thereby characterized that the customer communicates a mindest and/or a maximum rate (the limit) to his commission trading firm during order distribution expressly, to that it and/or bought intended. Thereby it guarantees that this course can be never over and/or fallen below to its disadvantage.

Kinds of Kauforders

• approve of (unlimited, i.e. to the cheapest attainable course)
• limited (one implements, as soon as the course is under the limit)
• stop buy limits (as soon as the course is exceeded, is released an unlimited purchase order)

approve of

Is a commercial option for purchase order approves of in the securities trading. It concerns thereby unlimited order, i.e. the order is implemented without conditions to the course of the security. In the order book of the stock exchange, at which is to be bought, for the buying order a sales order of same number of items with the cheapest price is looked for. That is the origin of the name of the commercial option.

Contrary to limited Orders the danger exists that the order is implemented to a higher than the current course, because the desired number of items no cheaper appropriate sales order is in the order book.

Stop Buy limit

Stop Buy limit is a commercial option for purchase order in the securities trading and designates a course upper limit. As soon as the indicated course is exceeded, a buying order implemented to the next tradable course approve of. The order is then implemented i.d.R. also to a course lying over the stop limit.

At first sight it seems senselessly, a security not under to want to buy but indicated over one course. A stop Buy limit can be however meaningful, if one not constantly observes the course of a security, if necessary however (with rising courses) "on the driving course jumps up" wants.

Kinds of Verkauforders

• in the best way (unlimited, i.e. to the best attainable course)
• limited (one implements, as soon as the course lies over the limit)
• stop loss limits (as soon as the course is fallen below, is released an unlimited sales order)

in the best way

A commercial option for Verkauforders in the best way is in the securities trading. It concerns thereby unlimited order, i.e. the order is implemented without conditions to the course of the security.

In the order book of the stock exchange, at which is to be sold, for the sales order a buying order of same number of items with the best (highest) price is looked for. That is the origin of the name of the commercial option.

Stop Loss limit

Stop Loss limit is a commercial option for sales order in the securities trading and designates a course lower bound. As soon as the indicated course is fallen below, an order to sell is implemented to the next tradable course. The order is then implemented i.d.R. also to a course which is under the stop limit.

At first sight it seems senselessly, a security not over to want to sell but indicated by one course. A stop Loss limit can be however meaningful, if one not constantly observes the course of a security, if necessary however (with sinking courses) "by the driving course jumps off" wants. Thus exposures to loss can be secured and/or profits be carried forward.

It pay attention that the stock exchange Stuttgart has special rules to stop Orders. There stop Loss Orders can be implemented after discretion of the as soon as a buying rate is present below the limit -- even if no course came to the execution.

Example:

• Buying rate: 15 "€
• current course: 18 "€
• one takes into account far rising courses, does not want to sell therefore yet.
• one sets a stop Loss limit with 17 "€
• if the course should sink thus on 17 "€, one can realize still 2 "€ profit, without having to constantly observe the course.

To note it is here that after reaching and/or falling below the stop Loss limit the order is to one "in the best way" - order will is implemented and to the course following on it - no matter how highly this course. That means that with above mentioned example quite also a loss can develop, if the course falls e.g. accordingly fast (course sinks on 17 "€ - > order is released - next course 14.50 "€ - > order is implemented to this course).

In the case of limited orders also are possible.

Psychology and loss delimitation

It is to nearly always guess/advise in addition each market participant to define a stop Loss course set before starting from which erworbens a security is to be sold again, if it develops downward in the course. This does not have to take place compellingly by means of the fact that an order is given to the own bank, but the course can be observed also.

Finally the buyer acquired the security mostly with the intention of obtaining profits. If the course of the security develops now in the direction, then it can be observed with many and in particular with inexperienced market participants that these "believe" in a Kurserholung almost want and to the old along outdated arguments to often clasp itself, which induced them in former times to the purchase of the security have. Often appropriate arguments are also convulsively/desperately looked for to the Untermauerung of holding the security. Here the objective view was then lost.

That has mostly psychological causes. The necessary confession in the own prognosis to have wrongly lain or however the circumstances not have evaluated correctly, are some the causes of such a behavior.

These market participants must often make afterwards the experience the fact that the course does not recover but the trend develops further following downward. In these cases a before defined maximum loss is meaningful over a stop Loss limit set before, so that the Kursverlust does not become a "barrel without soil".

Door time

Since under normal conditions no market participant knows exactly whether after a current course decrease of an individual maximum rate reached so far, the security in more near future will reach a new or however whether now a long-term phase with sinking courses is introduced, a sequentially updated stop Loss, for example always 5-25% under the past maximum rate also can be used to define a suitable door time. For the span of the stop Loss course to the maximum rate, which can be selected, the past range of the Wertpapierkurses might be decisive.

Further additives

Further one knows the following order additives, the English contractions is common also with German systems:

See also: Stock exchange contraction

Articles in category "Order additive"

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