Buying and Selling Stocks: Understanding the Lingo Can Help Deter Fraud

by Wall Street Fraud on July 23, 2012

Unsuitable investmentBeing an informed investor is one of the best ways to avoid stockbroker fraud. This means being able to understand what your broker is telling you about the securities held in your account and his or her recommendations regarding them.

One of the most important issues to understand is the different types of orders investors can use to buy and sell stocks through a brokerage firm. The two most common are the market order and the limit order.

  • Market Order: This is an order to buy or sell a stock at the best available price. Generally, this type of order will be executed immediately. However, the price at which a market order will be executed is not guaranteed. It is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed. In fast-moving markets, the price at which a market order will execute often deviates from the last-traded price or “real time” quote.
  • Limit Order: This is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. Given the restrictions, a limit order is not guaranteed to execute. A limit order can only be filled if the stock’s market price reaches the limit price. While limit orders do not guarantee execution, they help ensure that an investor does not pay more than a pre-determined price for a stock.

Brokerage firms generally offer additional order types and trading instructions. Therefore, it is important to ask questions if you do not understand what they mean for your investments.

If you have been the victim of adviser or broker fraud, we may be able to help you recover your losses. Contact us today at 215-839-3953 for a free consultation.

At Wall Street Fraud, we are dedicated to offering assistance to those who have been hurt by improper corporate or investment practices.

If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud or negligence, please contact our securities fraud attorneys today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses.

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