How to Enter Stock Trade Triggers for Your Investments
Those who trade (versus invest in) stocks use trade triggers regularly to keep from constantly monitoring the daily swings in market movements. Most brokerage firms offer this technology for frequent traders.
Trade triggers are used to make something automatically occur, such as the selling or buying of stock shares when a particular price level is reached. Essentially, trade triggers carry out the function of if this happens, then do that. If a trigger is, well, triggered, the trade is deployed, and the stock trader receives an e-mail notice as soon as the transaction is done.
Every brokerage firm has the glossary and tutorials necessary to guide you through the process of placing an order. The main components of the trade trigger order are
The order action: Is it a buy or sell order?
The order type: Is it a market order, a stop-loss order, or a limit order?
The quantity to be bought or sold: 100 shares? More? Less?
The symbol of the security to be bought or sold: This one’s self-explanatory.
The limit price and/or activation price for the order: This may or may not be applicable based on the type of order selected.
The expiration for the order: Is it a day order or good-til-canceled?
Keep in mind that not every broker performs these transactions the same way or labels these orders the same. Speak to your broker and discuss this list with him.
Here are a few more handy hints for establishing a trade trigger:
A trigger alert can be activated by a variety of sources. For example, you can have a trigger alert occur when a major market index, such as the Dow Jones Industrial Average (DJIA), hits a certain level. Or, these alerts can be based on a particular stock.
Some brokers can get very sophisticated with trade triggers, while other brokers may not do them at all (yet). Talk with your brokerage firm’s customer service department to see what triggers are available for traders and investors to use.
Triggers on stocks and options are normally activated during regular market hours (9:30 a.m. to 4:00 p.m. ET).
Talk with your broker about how long the triggers will stay on (until the triggers are activated or until they expire). Some brokers may have different time frames from the usual good-til-canceled time frame. The broker will usually send you an e-mail if the trigger is activated or if it expires.
If the trigger involves the purchase of a security, make sure that you either have enough cash for the order amount or enough margin to cover the purchase. Do a tally of the total amount you need — a combination of triggers or conditional orders may involve more than one purchase.