Short Video on How to Place Orders
Limit Orders: (see complete definition) A limit order is when you ask your broker to buy you shares and state the most you are willing to pay. A limit order of 1000 at 5.05 will not fill higher than that price. That means if the price moves quickly, you may not get 1000 shares. If you send a limit order of 5.05, when the price is 4.99, you will usually get filled immediately at 4.99-5.00, but not any higher than 5.05.
Market Orders: (see complete definition) A market orders tells our broker to get you shares at current market prices. If you send the order to buy 1000 shares at 5.00, the broker will get you 1000 shares, but since you haven’t said the most you are willing to pay, they may give you shares at a higher price. If you accidentally type in 100000 shares, you may get filled at 5.50 or higher.
Stop Orders: (see complete definition) A Stop Order is an order that will trigger when a stock crosses a certain price. A stop order is used by many traders to reduce risk. They set a stop at their max loss price. If the price crosses that level, the order is automatically sent. Stop orders can be sent as both market orders or limit orders
Ross's Trading Process:
1) Ross trades with Limit orders, he doesn’t use market orders. When he is routing his orders he primarily uses direct routing to ARCA or NASDAQ. When he traded at Suretrader they didn’t allow direct routing, so he simply used their Smart Routing which is just called LIMIT. Many brokers have smart routing, at Lightspeed it’s called LSPT, for example. Typically these routes are pretty quick, but direct routing is always preferable. In the Fantasy Stock Traders simulator, there is no direct routing, only LIMIT order routing.
2) When Ross sends his orders he is buying using a hotkey, that when pressed, will send a limit order via one of his preferred routes. To ensure his limit orders get filled he uses an offset. He sends the order with a 5 cent offset above the ask. So for example, if the ask is 5.10, his hotkey will automatically send the order at 5.15. Inside the Fantasy Stock Traders platform you have hotkeys that you can see from the Tools menu.
3) When Ross is about to take a trade, he first is watching the chart for a clean setup (Bull Flag, etc). Once he has identified his entry based on the chart pattern, he looks at the level 2 to see if there are a lot of sellers on the ask (this is resistance). If the level 2 looks good he will take an entry on the ask.
4) After he enters positions he does not set automatic stops, although many traders do and that’s okay too! Instead he uses a “mental” stop of 10-20 cents, and will sell if the stock drops that amount by selling with an offset 5 cents below the current bid. If the stock goes up, he will take profit 20-40 cents up, by selling with orders on the Ask price.
5) As part of Fantasy Stock Traders, and even most live trading platforms, you can enter with hot keys, set stops, and set profit targets. This will help you automate the process of taking these trades. In the simulator, Ross buys with Shift+1, set a 10 cent stop with Control+T and sets a profit target with Control+P.
6) Ross discusses the details of using hotkeys, reading level 2, and also provides the hotkey files that can be installed in Speedtrader or Suretrader, as part of Class 12 of the DT Course.
If you still have questions I’d encourage you to watch Class 12 of the Day Trading Course!