You know by now that timing is everything.
The problem is…
Most traders feel like they have to sit in front of their computers all day to nail their perfect entries and exits.
But I’m sure you’ve got MUCH better things to do with your time besides staring at stock prices and charts all day – especially as we head into these hot, summer months.
And although computerized trading systems can work for some people, this type of trading doesn’t necessarily give you the full picture – and it doesn’t work for everyone.
Fortunately… you can watch your trades and spend your well-deserved time at the beach – without even looking at your computer.
And it all boils down to these three little orders…
You can also use the limit order when you are trying to close an options trade.
Let’s say you own that September $35 call at $3.50, and the stock price ran drove the value of the call option to a bid price of $5.00 and an ask price of $5.20. You can use a limit order to exit your position and lock in your profits at a specific price or better – just as you would use a limit order to open a position.
2. The One-Cancels-Other (OCO) Order
3. The Contingent Order
Again, this type of “time” based order entry or exit can be used for anything; I just wanted to show you an example of why you might want to use it for a pending announcement.
Plan Your Trade, and Trade Your Plan
Over time, you will come to appreciate one type of order over another. A lot of it will be dictated by your personality type, how busy your life is, and whether you have the time you want or need to monitor your positions throughout the trading day.
So you’ll want to find the order types that work for you and hang your hat on it as part of your overall trading process. This will give you an even higher likelihood of success because you have taken care of the planning aspect of trading.
And I want to say just one last thing…
Even if you can spend time in front of your computer watching, in real time, what’s happening in the markets and every price fluctuation, you may want to consider using these order types where they’re auto-executed. Now it may be challenging to see an option getting close to your stop price without closing it too early, but chasing a trade can cause you to not only lose money, but miss out on future gains.
That’s why having your trading plan in place ahead of time, knowing when to take your money and run, and setting up your automatic trading platform can make your life so much easier – and so much richer.
And the types of orders we discussed today should help you adhere to a trading mantra that has served me – and many trading pros – very well…
“Plan your trade, and trade your plan.”
Here’s Your Trading Lesson Summary:
Last week, we talked about the importance of time when it comes to trading. But not everyone can spend all day at their computers watching their trades. And if you can’t, these are three orders you can use to set your trades and go:
- The limit order
- The one-cancels-other (OCO) order
- The contingent order
Until next time…