ARBA, A lesson re-learned
Now, for those of you who keep in check with this blog you will know that I had boughten 1,000 shares of ARBA at a steal price of $6.839. My order got processed yesterday afternoon at around 3:10 PM. Today, the company came out with 2 seperate news releases that posted positive for the company. Though the affects were delayed the stock ended up pushing to new highs within the day. The stock now sits with an ask of $6.98 and a bid of $6.97. The lesson I am going to make my day based on is order types. I placed an Limit order today at $6.88 to cover myself in case the stock went downwards. But the mistake I made was just that, the stock didn't go downwards but upwards and my order got triggered.
Not realizing it till about 10 minutes ago I figured out that I had in fact placed the wrong type of order. I am in fact somehwat dissapointed now but also content. My 1,000 shares were picked up by an Institution and I got $6.911 for them. Minus the costs to conduct the trades I profited about $50 off of my work. The cruddy part is is that my mistake of placing the wrong order type costed me $60 more accordinging to the current bid price. Now, I am sure it is probably confusing as to why my order got processed and why I am dissapointed but I will quote Ameritrade's help center to explain some of the basic order types:
"Types of Orders
After you have decided whether you plan to buy or sell a stock, the typical order ticket will give you a few more choices. You can choose between a market order, a limit order, a stop order, a stop limit order, and a trailing stop order. Each of these choices has its own implications as seen below.
A market order is an instruction to buy or sell a stock at the best market price available at the moment. For example, you may want to buy 100 shares of XYZ stock. If the current market for XYZ is 50 bid and 50 1/8 ask, you may or may not get the stock at 50 1/8. Market orders will definitely be filled, but you cannot be sure of the price. Prices will vary with current conditions, and these conditions are not always reflected on your computer screen. The actual price at which your order is filled may be better or worse than you expected.
A limit order lets you place a price restriction on your transaction. You indicate that you are only willing to buy or sell a stock at a certain price or better. Your order is not filled unless the stock trades at that level. Placing a limit order, however, is not a guarantee that your trade will be executed at your limit price. It does, however, eliminate the risk that your order will be filled at a price worse than you expected.
For example, if you want to buy XYZ stock at $50 a share once again, and the market price is 50 bid and 50 1/8 offer, your order cannot be filled immediately. If somebody comes to sell the stock at $50, then your order will be filled if it is next in line for execution. If more buyers enter the pit and drive up the stock price, your order will not be filled.
A stop order is an order to buy or sell a stock at the market price once the price reaches or passes through a specified point, called the "stop price." This type of order is generally used by people who own a stock and want to make sure they sell out if the stock price starts to drop. The stop price placed on a sell stop order must be below the current bid price of the security.
Stop orders in volatile issues will not guarantee an execution at or near the stop price. Once triggered, they are competing with other incoming market orders.
Stop orders can be placed for buy orders as well. The stop price specified for a buy order must be above the current asking price.
A stop limit order performs like a stop order with one major exception. Once the order is activated (by the stock trading at or "through" the stop price), it does not become a market order. Instead, it becomes a limit order with a limit price equal to the former stop price.
For example, you place a stop limit order to sell stock with a stop price of $45 a share. As with the stop order, once the stock trades at $45, your order is triggered. However, the broker cannot sell it below $45 a share no matter what happens. The advantage of this order is that you set a minimum price at which your order can be filled. The disadvantage is that your order may not be filled in certain fast market conditions. In this case, if the stock keeps moving down, you will keep losing money.
A trailing stop order is similar to a stop order, but instead of a stop price, a stop parameter is used, creating a moving or trailing activation price. The stop parameter can be entered in points or by percentage.
For example, you own 200 shares with a cost basis of $10. The stock is now trading at $15. You want to protect yourself against a drop in the stock. Instead of a stop order at $13, you place a trailing stop with a stop parameter of 2 points. The activation price is calculated by taking the current price and subtracting the stop parameter. For this example, the initial activation price is $13. If the stock never goes higher than $15, the order will activate when the stock hits $13. If the stock goes to $16, the activation price becomes $14. Please note: For sell trailing stops the activation price only moves upward, and for buy trailing stops the activation price only moves downward.
Source:
Ameritrade Education Center
http://www.ameritrade.com/educationv2/ameritrade_framed.html"
Can you see my mistake and can you see the order that I should have placed? I hope that you now have a better understanding for the options you have once you own a stock and how you have to be very careful with what order you actually place. ARBA is now over unless I can get a competitive price again which may or may not happen. The mistakes you make in the real game are the ones that stick with you the longest; learn from my mistakes ;) !! I wish everyone a good morning (to those of you who may still be getting up) and look for my new possible picks later on today.
To the future,
Not realizing it till about 10 minutes ago I figured out that I had in fact placed the wrong type of order. I am in fact somehwat dissapointed now but also content. My 1,000 shares were picked up by an Institution and I got $6.911 for them. Minus the costs to conduct the trades I profited about $50 off of my work. The cruddy part is is that my mistake of placing the wrong order type costed me $60 more accordinging to the current bid price. Now, I am sure it is probably confusing as to why my order got processed and why I am dissapointed but I will quote Ameritrade's help center to explain some of the basic order types:
"Types of Orders
After you have decided whether you plan to buy or sell a stock, the typical order ticket will give you a few more choices. You can choose between a market order, a limit order, a stop order, a stop limit order, and a trailing stop order. Each of these choices has its own implications as seen below.
A market order is an instruction to buy or sell a stock at the best market price available at the moment. For example, you may want to buy 100 shares of XYZ stock. If the current market for XYZ is 50 bid and 50 1/8 ask, you may or may not get the stock at 50 1/8. Market orders will definitely be filled, but you cannot be sure of the price. Prices will vary with current conditions, and these conditions are not always reflected on your computer screen. The actual price at which your order is filled may be better or worse than you expected.
A limit order lets you place a price restriction on your transaction. You indicate that you are only willing to buy or sell a stock at a certain price or better. Your order is not filled unless the stock trades at that level. Placing a limit order, however, is not a guarantee that your trade will be executed at your limit price. It does, however, eliminate the risk that your order will be filled at a price worse than you expected.
For example, if you want to buy XYZ stock at $50 a share once again, and the market price is 50 bid and 50 1/8 offer, your order cannot be filled immediately. If somebody comes to sell the stock at $50, then your order will be filled if it is next in line for execution. If more buyers enter the pit and drive up the stock price, your order will not be filled.
A stop order is an order to buy or sell a stock at the market price once the price reaches or passes through a specified point, called the "stop price." This type of order is generally used by people who own a stock and want to make sure they sell out if the stock price starts to drop. The stop price placed on a sell stop order must be below the current bid price of the security.
Stop orders in volatile issues will not guarantee an execution at or near the stop price. Once triggered, they are competing with other incoming market orders.
Stop orders can be placed for buy orders as well. The stop price specified for a buy order must be above the current asking price.
A stop limit order performs like a stop order with one major exception. Once the order is activated (by the stock trading at or "through" the stop price), it does not become a market order. Instead, it becomes a limit order with a limit price equal to the former stop price.
For example, you place a stop limit order to sell stock with a stop price of $45 a share. As with the stop order, once the stock trades at $45, your order is triggered. However, the broker cannot sell it below $45 a share no matter what happens. The advantage of this order is that you set a minimum price at which your order can be filled. The disadvantage is that your order may not be filled in certain fast market conditions. In this case, if the stock keeps moving down, you will keep losing money.
A trailing stop order is similar to a stop order, but instead of a stop price, a stop parameter is used, creating a moving or trailing activation price. The stop parameter can be entered in points or by percentage.
For example, you own 200 shares with a cost basis of $10. The stock is now trading at $15. You want to protect yourself against a drop in the stock. Instead of a stop order at $13, you place a trailing stop with a stop parameter of 2 points. The activation price is calculated by taking the current price and subtracting the stop parameter. For this example, the initial activation price is $13. If the stock never goes higher than $15, the order will activate when the stock hits $13. If the stock goes to $16, the activation price becomes $14. Please note: For sell trailing stops the activation price only moves upward, and for buy trailing stops the activation price only moves downward.
Source:
Ameritrade Education Center
http://www.ameritrade.com/educationv2/ameritrade_framed.html"
Can you see my mistake and can you see the order that I should have placed? I hope that you now have a better understanding for the options you have once you own a stock and how you have to be very careful with what order you actually place. ARBA is now over unless I can get a competitive price again which may or may not happen. The mistakes you make in the real game are the ones that stick with you the longest; learn from my mistakes ;) !! I wish everyone a good morning (to those of you who may still be getting up) and look for my new possible picks later on today.
To the future,
posted by Blain Reinkensmeyer at
10:51 AM
5 Comments:
Ok, let me know if I'm understanding this correctly or not...with the limit order, the order will take place when it reaches at least the limit price set, I think I got that. And was your order for selling the stock? because that is what I'm picking up from that. Is that right? And so the problem was that you set the limit price at 6.88 because you thought it was going to go down, but it in fact went up, and since the price was higher, your order was filled and your stocks were sold at 6.91, instead of waiting for the price to reach the point that it has gotten to. Let me know if I got this right. And I'm also not quite sure what order you should have placed.
Thanks Blain
-Kent
By
Anonymous, at 12:08 PM
Kent, well said, you got it right on the nose. Yes my order was for selling my stock. My mistake was that I placed the wrong order for the price the stock was at. A limit order trys and gives you the best price for your shares. As a result, the Market Makers filled my order "at a better price" then what I was asking for. What I was trying to do was protect myself from a down swing to lock in my gains. So the type of order I was actually looking for was a Stop Order. What this does is it allows the stock to continue to trade and do its thing and as long as the price DOES NOT touch my stop price I stay in. But, if the price falls to my limit price or below than I am automatically sold out. Excellent thinking on your part,
To the future,
Blain
By
Blain Reinkensmeyer, at 12:22 PM
Alrighty, cool. Thanks for the info Blain
Kent
By
Anonymous, at 2:09 PM
Blain, Just wanted to post up and say that I am really enjoying learning here. My only question so far is, How do you find time to watch all of this when you are in school? Or are you out for the summer? Anyhow...
Good Luck With Everything
Mark
By
Anonymous, at 7:56 PM
I am off for the summer man, I wake up for the opening bell at 9:30 AM and I'm on or by my computer till 4 PM when the market closes. It is alot easier to keep myself busy now with making posts on the blog. The blog also keeps me on my toes. This is my summer job so the more time I put in the more potential moeny I can make. Have a good one man,
To the future,
Also - Thanks for covering for me over the weekend while I wasn't on the forums man.
By
Blain Reinkensmeyer, at 8:13 PM
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