Automatically to the goal
If investors set clear guidelines for execution, they can reduce risks in trading and make better use of opportunities. Thanks to a wide range of order types, this is possible without great effort.
If you place an order for securities without any additions, you lose control: your order will simply be executed at the next possible price – and that can definitely deviate from the price level actually targeted. Precise action is hardly possible, for example to precisely secure positions or for targeted acquisitions.
A first important step is therefore to provide an order with a limit. Limit orders are only filled at the price set by the investor or better. Another variant is the stop-loss order. In the case of a sale, the investor defines a barrier here that is below the current price. If this mark is undercut, the sale takes place automatically at the next possible price.
Intelligent order types, such as those offered by Boerse Stuttgart for all asset classes, open up even more possibilities: buy and sell orders can be linked even more precisely to specific market conditions and executed automatically.
The most popular intelligent order type is the trailing stop order: In the event of a sale, the investor defines a stop-loss limit in advance, which is automatically increased by the selected distance when prices rise. If the price later falls and reaches the limit, the security is sold. This allows investors to conveniently let profits run and limit risks. They don’t need to constantly monitor the market and manually adjust their stop limits. With the trailing stop order, investors can choose between an absolute and percentage distance between the limit and the price. In order to protect yourself against price fluctuations over a longer period of time, it is advisable to choose the percentage distance. The more volatile the security is, the larger the distance you choose should be.
Another intelligent order type is the One Cancels Other Order, or OCO for short. This is a combination of two orders. The special feature: when one order is executed, the other is automatically deleted. If the investor wants to sell a security, he can use this order type to position himself for both falling and rising prices. He chooses a stop-loss order to hedge his position down. At the same time, he sets an upper sell limit in order to automatically realize profits. However, if the investor wants to buy a paper, he can set a purchase limit below the current price. At the same time, he chooses a stop buy order above it. The effect: he either automatically enters at a lower price or at the upper limit because he expects further price gains if this mark is exceeded.
The third intelligent order type at Boerse Stuttgart, the stop-limit order, also offers added value for investors. In addition to a stop loss, the investor also specifies a sell limit that is at the same level or below. If the stop-loss threshold is reached, the limited sell order is activated and entered in the order book. Execution then takes place at the next possible price, provided this reaches or exceeds the desired sell limit. However, if the desired minimum selling price is not reached due to adverse market conditions, the investor remains invested in the position.