Stock trading isn't for everyone. Some folks can do it and some can't. Even among the some who can, not everyone can be successful at it. While there are no hard and fast rules on what makes or doesn't make a successful stock trader, those Wall Street Wizards you may hear about who made the most in the shortest amount of time, all seem to have certain characteristics in common.

Once you, the investor, has made the decision to invest via the stock market, there are several options in which you can participate in order to ensure that you do not suffer any great losses.  These options are called “orders” which are decisions that you alone can make regarding your stock trading investment, or decisions that you choose to make after consulting the professional advice of your stockbroker.  In order to effectively use the orders, you must know exactly what each order consists of, the advantages vs. the disadvantages, as well as, how to effectively place each one.  In previous articles, the most common stock orders were explored and a general overview about each one was given. 

Within the buy to cover orders, there are 4 options in which to place onto your stock purchases.  When you buy to cover on a market order, you are in

agreement that you will purchase the stock at the current market price, however, because there is a lag between the time you agree to purchase the stock and the actual transaction, a price difference could occur.  You could end up paying more than anticipated for each stock, or a considerably lower amount per stock, which is what you are hoping for.  You can also buy to cover limit orders, in which guarantees that you will pay no more than the set limit price.  However, if stock prices stay above the limit price, this type of buy to cover order will never be executed. 

If you are planning to buy stocks as a long term investment you might want to consider placing a bracketed order on it.  A bracketed order goes one step further than a trailing stop order.  Remembering that a trailing stop order, you are in control of your investments because you are able to limit the amount of your losses by setting stop price.  With a bracketed order, you are able to not only set a limit on your losses, but you are able to set a limit on your profit, that when reached, your stock will be sold. 

Investors that implement selling short are taking the gamble that they will be able to buy the stock at a lower price than the price in which they sold short.  Basically, the investor is selling stock that they do not own in order to make a profit.  In other words, the investor sells stock that is promised to be delivered. 

This concept may sound thoroughly confusing, but actually, selling short is an advanced stock market order that, once explained, is easy to understand.   

With a stop loss order, it is necessary that you thoroughly understand market orders so that you will not become confused.  As a reminder, a market order is simply instruction from your stockbroker to either purchase or sell as certain stock.  When a stop loss order is placed it instantly becomes a market order when a pre-calculated price is reached.  At that point, the typical rules of a market order come into effect, meaning that the order is virtually guaranteed to be executed.  The gamble here is that you don't know the price.  Because you have set a predetermined price, and the stock has reached that point, it does not guarantee that by the time a stop loss order is placed that it will be that price.  The tricky part of a stop loss order is that a certain stock may reach the predetermined price, however, because the stock market fluctuates, by the time the stop loss order is placed, the stock price could have increase or decreased. 

If you are an investor who relies heavily on penny stocks, the all-or-none order (AON) is extremely important.  The AON order works to safeguard your purchase by providing the guarantee that you either receive every single stock that you requested or none at all.  This type of order can problematic when a particular company lacks the cash to stand behind their stocks or a limit has been placed on the order.  All-or-none orders are the lowest priority of your stockbroker therefore, this type of transaction is executed last, so when your broker finally attempts to execute this order, there must be enough stocks available to buy or the order is null and void.  Therefore, your all-or-none order will not be filled until there is enough stock available no matter how much time elapses before purchase of an AON order is accomplished. 

A market order is simply instruction given to you from your broker as to whether you should buy or sell a certain stock at that very moment for the best price possible.  Because a market order guarantees execution, either buying or selling stock, it offers brokers low commissions because of the minimal work that is involved.  You have to be careful with market orders on stocks that have a low daily volume, meaning that a certain stock does not increase very much daily, therefore, when you sell it, the profit that you gain, if any, would not match that of what you, in fact, bought each stock for.  Therefore, you should feel more secure using a market order on stocks such as Microsoft that steadily increase on a daily basis. 

In the stock market realm, one way to protect all your gains from purchased stock and to limit the amount of losses is to place a trailing stop order which sets the stop price at a certain amount.  If the stock market prices rise, then so does the stop price, however, if the stock market prices decrease, the stop price remains the same.  This allows the investor to set a limit on the maximum possible loss he or she is willing to accept, however, the amount of gain is limitless.   

As the end of each year winds down, there are five distinct procedures that you need to be sure to do in order to keep your stock portfolio current as well as to save you some money.  This also helps to get your stock trading in check before the start of the new year.  By providing a little maintenance to your stock portfolio, you can guarantee that your stock trading will be ready to go for the new year. 

The following are five procedures in which you, the investor, need to be aware of before the end of the year in order to properly maintain your stock investments: