When I place an order to buy or sell stock, how long is it good for? Do I need to keep renewing it?

You may leave your stock orders open for different periods of time. When making a stock order you need to put limits on how long the order is good for and what you are willing to pay. If you do not, you will pay the current market price and the transaction will execute almost instantly.

More and more investors are opting to use an Internet-based broker for their trading, which often means they must know exactly the type of buy or sell order they want to enter.
You can use a variety of buy or sell orders to take more control over the transaction than a simple market order. Some of the orders restrict the transaction by price, while others constrain it by time. Price is a good way to make sure you are paying the price you want to pay. However, if the purchase order is left on too long then the price you want to pay may have changed.

If you are a day trader, then an order than is in place longer than a couple of hours may be too long. If your strategy is more long term, you may not care if it takes a month or two for your order to fill. Your strategy will determine how long you want your transaction to remain valid.
Some brokers limit how long you are able to keep a purchase order open. You may have to renew your purchase order every day or once a month. This will depend on your specific broker. You may want to do some research on what each broker allows before choosing your broker.
Let's go over some of these orders, which work whether you are dealing with an Internet-based broker or an actual human. Each order also has a different time frame associated with it.
Market Order
The market order is the simplest and quickest way to get your order filled (or completed).
A market order instructs your broker to buy or sell the stock immediately at the prevailing price, whatever that may be. Usually your order is completed instantly and there is no need to limit the time.
Limit Orders
Limit orders instruct your broker to buy or sell a stock at a particular price. The purchase or sale will not happen unless you get your price. Limit orders give you control over your entry or exit point by fixing the price, which can be helpful.

You should put a time frame on the limit purchase order. If you are making the purchase online you will usually have to designate the time frame this order will be valid. Many brokerages have the default value as one day.

The limit sell order should be made a lot longer if not GTC (good till cancelled). The reason you want to do that is because it is to protect your investment against going to low. You wouldn't want the time period to expire and then have the stock drop.
Stop Loss Orders
A stop loss order gives your broker a price trigger that protects you from a big drop in a stock.
You enter a stop loss order at a point below the current market price. If the stock falls to this price point, the stop loss order becomes a market order and your broker sells the stock. If the stock stays level or rises, the stop loss order does nothing.
Stop loss orders are cheap insurance that protects you from a loss. The stop loss order should be made a lot longer if not GTC (good till cancelled). You wouldn't want the time period to expire and then have the stock drop.
Trailing Stops
The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against a loss.
If you have a profit in a stock, you can use the trailing stop order to follow it up. You enter the trailing stop order as a percentage of the market price. If the market price declines by that percentage, the trailing stop becomes a market order and your broker sells the stock.
If the stock continues to rise, the trailing stop follows it up since it is a percentage of the market price. This protects your additional gains. Again, GTC would be the proper strategy here.
In summary, each type of buy or sell transaction has a different strategy associated with it. You must determine if your strategy is short term or more of a permanent nature. Once you have decided your strategy, place the proper time limitations on your buy and sell orders.

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Categories: Buying and Selling Stocks,

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