Placing trades

How do you actually place a trade? It is a bit more complex than simply clicking a button (unless you want to blow up your account quickly). You need to make several decisions when opening a trade. Do not worry: it may feel complex now, but once you understand these choices, it quickly becomes routine.

Order types

There are three order types used to execute a trade:

Market order

A market order is executed immediately at the best available price at that moment. Execution is guaranteed, but the exact fill price is not.

How it works:

• You place a market order to buy or sell.
• The order is executed immediately at the current market price.
• The fill price may differ slightly from what you see on your chart (slippage, explained below).

Limit order

A limit order is executed only at your specified price or better.

How it works:

• You set a price (for example $100).
• For buys: The order executes when price falls to $100 or lower.
• For sells: The order executes when price rises to $100 or higher.
• There is no execution guarantee: if price never reaches your entry, nothing happens.

Stop order

A stop order becomes a market order once a specified price (the stop price) is reached.

How it works:

• You set a stop price (for example $100).
• As long as price stays below $100, nothing happens.
• Once price touches or breaks through $100, a market order is triggered automatically.
• The order fills at the best available price at that moment (which may differ from your stop price).

In practise

So what are the practical differences between these orders, and when should you use each one? Here is a useful overview.

Limit order:

• Buy limit: A buy order (long trade) placed below current price. It executes when price drops to your entry. Example: price is $100, your buy limit at $99 executes when price falls to $99. You expect price to reverse upward afterward.
  • Note: If you place a buy limit above current price (for example, price is $100 and buy limit is $101), it executes immediately at market price (like a market order). If you want to buy when price rises, use a buy stop order.
• Sell limit: A sell order (short trade) placed above current price. It executes when price rises to your entry. Example: price is $100, your sell limit at $101 executes when price rises to $101. You expect price to reverse downward afterward.
  • Note: If you place a sell limit below current price (for example, price is $100 and sell limit is $99), it executes immediately at market price (like a market order). If you want to sell when price falls, use a sell stop order.

In short: a limit order is executed at your entry price or better. You wait for price to come to your entry (and then reverse).

Stop order:

• Buy stop: Placed above current price. It executes when price rises through your entry. Example: price is $99, your buy stop at $100 executes when price reaches $100. You expect price to continue rising.
• Sell stop: Placed below current price. It executes when price falls through your entry. Example: price is $101, your sell stop at $100 executes when price reaches $100. You expect price to continue falling.

In short: a stop order executes at market price (which may be less favorable). You wait for price to break through your entry and continue moving.

Going long or short

You already learned that you can make money in both rising and falling markets:

Going long: You buy an asset because you expect price to rise. You sell later at a higher price. This is what most people know.

Going short: You sell an asset (borrowed through your broker) because you expect price to fall. You buy it back later at a lower price. The difference is your profit.

In your trading platform, you simply click "Buy" or "Sell." Your broker handles the rest automatically. For you as a trader, this is operationally straightforward.

Stop loss

A stop loss is an automatic order that limits your loss. Example: you buy an asset at $100 and set a stop loss at $98. If price drops to $98, your position is sold automatically, limiting your loss to $2. In most trading platforms, you can set a stop loss via drag-and-drop, manually enter a price, or place a protective counter-order.

Why is a stop loss so important?

• It protects you against large losses.
• It prevents emotional decisions ("it will recover").
• It is essential for risk management.

How do you set stop-loss price? This depends on market conditions and your trading strategy. We will go deeper into this in a later chapter.

Important: ALWAYS set a stop loss when opening a trade. Without one, losses can become very large.

Target / Take profit

A take profit (also called a target) is an automatic order that secures profit. Example: you buy an asset at $100 and set a target at $104. If price rises to $104, your position is sold automatically and you lock in $4 profit.

Is a target required? A fixed target is not always required. Different exit strategies exist, depending on market conditions and your strategy.

How far should take profit be?

• Risk-reward ratio: If you risk $2 (stop loss), aim for at least $4 profit (1:2 risk-reward ratio, or 2R).
• Technical levels: Place take profit just before key resistance (for longs) or support (for shorts). Only take trades where at least 2R fits between entry and the next major level.

Tip: You can set multiple take-profit levels. Example: sell 50% at target 1 and let the rest run to target 2. This is called taking partials.

Spread

The spread is the difference between bid price (where you can sell) and ask price (where you can buy). This difference always exists in the market.

Example: If ask is $100 and bid is $99.98, the spread is $0.02.

When do you "pay" the spread?

• With market orders: You buy at ask and sell at bid immediately. You pay the spread instantly.
• With limit orders: If your limit order at $100 fills, you get exactly $100. The spread is not visible in that entry price, but it still exists in the market. You effectively "pay" it when exiting: you sell at lower bid (or buy back at higher ask on shorts).

Why is this important?

• Larger spreads make trading more expensive: price must move further for profitability.
• With market orders, you start with a small loss immediately (the spread).
• On exit, you always sell at bid (or buy back at ask for shorts).

The smaller the spread, the better. High-volume stocks usually have tight spreads. Low-volume stocks often have wide spreads. As a beginner, it is better to avoid instruments with large spreads.

Slippage

Slippage is the difference between expected price and actual execution price. This is different from spread.

Example: You place a buy order at $100. Due to a fast move, it fills at $100.05. That extra $0.05 is slippage. It can also work in your favor: your order may fill at $99.98, better than expected.

When does this happen?

• During high volatility or fast moves, such as the first 10 minutes after market open or major news.
• In low-liquidity conditions, where fewer orders are available.
• With market orders, where you accept whatever price is currently available.

Difference versus spread:

• Spread always exists in the market (difference between bid and ask). With limit orders, you may not see it immediately, but you still pay it when exiting.
• Slippage is additional: it is the deviation caused by market movement between order placement and execution. It can be positive or negative, but negative slippage is more common.

How do you reduce slippage?

• Avoid trading during major news events or the first minutes after market open.
• Choose liquid, high-volume stocks.

A complete trade: example

1. Recognize setup: You see a bullish pattern on the chart, price above VWAP, and high volume.
2. Define entry: You place a limit order at $100 (just above a key level).
3. Stop loss: You set stop loss at $98 (below support, $2 risk).
4. Take profit: You set take profit at $104 (just below resistance, $4 reward = 1:2 risk-reward ratio).
5. Place order: You click "Buy" and wait.
6. Management: If your order fills, let the plan play out. No emotions - just execution.

This is how professional traders work: with a plan, stop loss, and take profit. Without these elements, trading becomes gambling.

Volgende stappen

Now that you know how to place trades, it is time to practice a few times. Start with papertrading (demo account) to learn without risk. In the next section, we go deeper and cover strategy and emotion logging. Continue here: Strategies