When you've decided to buy or sell a
stock, you call your
stockbroker
or financial adviser, or you enter your order using your online
brokerage account. At that point you must also choose what type
of order to give:
If you give a
market order,
you buy or sell a specific number of shares of stock at the price at which that stock is trading
when the order is executed — usually close to the price
that your broker reports as the market price when you give
the order, or that you see on an electronic ticker. But the
actual price could be higher or lower than you expected.
If you give a limit
order to trade at a specific price, your order
is held until it can be filled at that price or better. If
you give a good 'til canceled order (GTC), it remains
in effect until you withdraw it or your brokerage firm's
execution deadline, if any, expires. If you give a day order,
it lasts until the end of the day and will automatically be
canceled if it's not executed.
What you may not know is how your order is
translated into the result you want: either new shares of stock
in your portfolio or more cash in your account. If you're
curious, you can read on to follow the path of that trade.
What's the price?
A number of factors affect
the price you pay to buy stock or the amount you receive
when you sell. Some you recognize, such as a flurry
of interest in a company that reports sharply higher
earnings. But where and how your order is executed
— at an exchange, through a market
maker,
or on an
electronic
communications network (ECN) — also
makes a difference.
