Introduction to Day Orders in Stock Trading - dummies

Introduction to Day Orders in Stock Trading

By Paul Mladjenovic

A time-related order for stock is just that — the order has a time limit. Typically, investors use these orders in conjunction with condition-related orders. A specific type of time-related order, a day order is an order to buy or sell a stock that expires at the end of that particular trading day.

If you tell your broker, “Buy BYOB, Inc., at $37.50 and make it a day order,” you mean that you want to purchase the stock at $37.50. But if the stock doesn’t hit that price, your order expires, unfilled, at the end of the trading day.

Why would you place such an order? Maybe BYOB is trading at $39, but you don’t want to buy it at that price because you don’t believe the stock is worth it. Consequently, you have no problem not getting the stock that day.

When would you use day orders? It depends on your preferences and personal circumstances. You may feel that you don’t want a specified order to linger beyond today’s market action. Perhaps you want to test a price. A day order is the perfect strategy to use in this case.

If you make a trade and don’t specify a time limit with the order, most (if not all) brokers will automatically treat it as a day order.