Gamesguy, could you explain how Buy To Cover and Sell Short work?
When you short a stock you are essentially borrowing some shares from your broker and then selling the stock at the current market price.
You do this betting the stock will go down, after which you can buy the stock(returning those borrowed shares) at a lower price.
What I don't understand is how exactly how 'hold' and different types of pricing works.
Market- fills at whatever market price is, never use this in real life trading.
Market on close- tries to fill at the last second of the trading day.
Limit- tries to fill at the price you set or better. IE if you set a buy limit at 20 and the stock is at 19, it will fill at 19. But if the stock is at 21, it won't fill unless it drops back down to 20. The reverse is true for sell orders.
Stop- ONLY activates once the stock price has passed the number you set. After which it turns into a market order and fills at the next best price.
The following you can't use in the game but are extremely useful for RL trading:
Stop Limit - This is an order you use if you think a stock is gonna go up but don't want to buy till it shows some momentum. For example if a stock is at 15 bucks and you set a stop limit of 16 and 17. What will happen is if the stock price passes 16 your stop order activates and you buy, then your order automatically turns into a sell limit order at 17. I don't like this order, because if you think the stock will rally, a bull spread is better and less risky.
Trailing stop($ or %)-
This is your friend. A trailing stop order is what you use when you are making a profit but don't want to get screwed over if the stock makes a sudden turn. You set an amount you are willing to lose(in $ or %), and then the order follows the price of the stock.
For example, if you bought a stock at 15, it's currently at 16, you want to let your profits run but don't want to get screwed over. You can set a trailing stop order of say 0.3. Now your stop order will automatically follow 0.3 below the price of the stock. If the stock rises to $17, your sell stop order will be 16.7. So in this example if the stock rises to 17 and then drops back down, your stop order will execute at 16.7. But if the stock keeps rising to 20, your order will keep following the price of the stock, always at 0.3 below.
