If you want to buy or sell securities, you must trade through licensed members or security persons to abide by the Securities Exchange Act of1983 which has prohibited these brokers to make transactions without getting orders from their clients. The orders can be Buy or Sell order.
- Buy Order
It is the order placed by buying brokers to purchase the securities on behalf of his clients/investors. In this order, s/he has to mention clearly the name of the companies, the number of securities that s/he wants to buy and the validity of the orders. If the validity period of the order is not mentioned, it will be valid for only 15 days.
- Sell Order
It is the order placed by the selling client to the broker to execute the transactions. In this order too, the client has to mention the name of the company, number of securities, prices of the securities that s/he wants to sell for and the validity period of the orders. If the validity period of the order is not mentioned, it will be valid for only 15 days.
Generally an investor can mention the price in 3 ways in his/her orders:
If the investor is sure about the performance of the company and the profitability of the company, s/he can state the fixed price for the purchase and sell of the securities. In this situation, the brokers are not allowed to execute at higher and lower than the stated price.
If the investors are in dilemma and want to execute the transactions, they can quote the price in range. In this situation, s/he gives certain liberty to his brokers to negotiate and execute the transactions on his/her behalf. S/he can also quote the maximum price if s/he is buying shares or can quote the minimum price if s/he is selling shares in order to stop loss because of intra-day fluctuations.
- Open Price
It is the orders in which the investors do not state price and leave it open to allow the brokers to execute the transactions at the appropriate price or the ruling price. In this situation, the investors must have full trust with the brokers.