1. Markets & Limits & Stops, OMY !!!
A guide to stock transaction orders
Herb Barnett
Expo Seminar B3

2. Disclaimer
The information in this presentation is for educational purposes only and is not intended to be a recommendation to purchase or sell any of the stocks, mutual funds, or other securities that may be referenced. The securities of companies referenced or featured in the seminar materials are for illustrative purposes only and are not to be considered endorsed or recommended for purchase or sale by BetterInvesting™ National Association of Investors Corporation (“BI”) or the BetterInvesting Volunteer Advisory Board, its volunteer advisory board (“BIVAB”). The views expressed are those of the instructors, commentators, guests and participants, as the case may be, and do not necessarily represent those of BetterInvesting™ or BIVAB. Investors should conduct their own review and analysis of any company of interest before making an investment decision.
Securities discussed may be held by the instructors in their own personal portfolios or in those of their clients. BI presenters and volunteers are held to a strict code of conduct that precludes benefiting financially from educational presentations or public activities via any BetterInvesting programs, events and/or educational sessions in which they participate. Any violation is strictly prohibited and should be reported to the President of BetterInvesting or the Manager of Volunteer Relations.

3. Our Objective
To lessen any uncertainty about your choices when buying or selling a stock
We will discuss
Common terms
Order types
Pros and cons
Examples
Entering orders
Conditional orders

4. About Our Examples
We will be discussing only “long” positions, not margin, shorts or options. Actual dollar amounts and percentages used in the examples are not to be considered as recommendations. When placing a trade you should always use whatever values are appropriate for your specific situation. Commissions are ignored for these examples.

5. Stock Pricing Terms Think of market as an auction
Bid price What a buyer is willing to pay
Ask price What a seller wants to receive
Spread Bid  Spread  Ask

6. Order Types Market Good ’Til Canceled Limit Stop
Trailing Stop ($ or %)
Conditional

7. Market Order
Transaction is executed immediately during normal trading hours
Buy at the market
Pay the ask price
Sell at the market
Receive the bid price
You pay, or receive, the current quote at the moment your order is entered

8. Good ’Til Cancelled (GTC)
Order is open until executes or expires
May or may not execute
Executes only if your target is met
Your choices for expiration
End of trading day
End of interval set by broker
When you cancel
May cancel automatically on split or dividend

9. Limit Order You specify a price Broker acts when order is triggered
Broker may refuse outrageous request
May be limited to 20% to 30% from current price
Broker acts when order is triggered

10. Buy Limit Specify price below current price Stock currently at $35
SSG suggests Buy Below $30 (3:1 U/D)
Enter “Buy with $30”
May execute at or below $30
May not execute at all
Stock may not drop to your limit

11. Stop-Loss Target must be below current price
“Sell if price drops to $30”
Some protection against sharp drop in market
No assurance you will get price you specify
Bad news may force price through your target without stopping
You will get best price available

12. Stop-Limit to Sell Sets specific price for execution
“Sell stop-limit at $30”
Stock will be sold if there is a buyer at $30
Stock will not be sold if price drops below $30
Order is still in effect (Day or GTC)
Will execute if stock goes back up to $30

13. Trailing Stop to Sell
Provides some protection for profits if stock is rising
Stop is adjusted upward (re- priced) continuously as stock reaches new highs
Trailing stop can go up, not down
Examples:
Sell if it drops $5
Sell if it drops 10%

14. Trailing Stops Stop moves up as stock price increases Buy @ $40
Stock drops below $49 stop, Sell Order is activated
Stock hits high of $53, stop is at $49
Trailing Stop $4
Stop stays level as stock declines

15. $ Trailing Stop Examples
Current Price $50
Trailing stop $5.00 below = $45.00
Stock is sold if it drops to $45.00
Current price rises to $100
Trailing stop $5.00 below = $95.00
Stock is sold if it drops to $95.00
Much smaller % change triggers sale as price increases

16. % Trailing Stop Examples
Current Price $50
Trailing stop 10% below = $45.00
Stock is sold if it drops to $45.00
Sold at $5.00 less than high
Current price rises to $100
Trailing stop 10% below = $90.00
Stock is sold if it drops to $90.00
Sold at $10.00 less than high
% change is the same

17. Setting Your Trailing Stop
Percentage may be more appropriate than dollar amount
If set too tight, you may lose good stock on brief dip
Don’t get too greedy
Normally entered as GTC order
Need to keep track of expiration
Broker may cancel or adjust on stock split or dividend

18. Market Order Entry
Basic order

19. More Detailed Order Entry
Specify target for all except market orders
Basic order
Set up a conditional order

20. Conditional Orders Enter combination of multiple orders
Cannot be market order
Multiple orders must be same type
OCA – One Cancels Another
If first executes, other is canceled
OTA – One Triggers Another
If first executes, other is submitted

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