Difference between STOP Order and Market-If-Touched (MIT) Order

Stop Order is actually quite similar to Market-If-Touched (MIT) order.The difference between Stop Order and MIT order is basically on the placement of predetermined price that triggers its execution (i.e. �Stop Price� for Stop Order and �Trigger Price� for MIT Order) relative to the current market price of the security.* For Sell order, the Stop Price for a Sell Stop Order is placed below the current market price of the security, whereas the Trigger Price for a Sell MIT Order is placed above the current market price of the security.Note:Sell Stop Order is a normally used for "Sell To Close� order, which is a order to sell to close the long position...

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Stop Order

Stop Order is an order (buy/sell) to close a position that only executes when the current market price of an option/stock hit or pass through a predetermined price (i.e. Stop Price).Once the Stop Price is passed, the Stop Order would convert into a Market Order, and will be filled at the best available price in the market at that time.Stop Order is also known as Stop Loss Order or Stop Market Order.Stop Order is commonly used to limit / reduce losses on a position when the price moves sharply against the trader/investor, or to lock in profit from a position to prevent you from �giving your profit back to the market�.Depending on the position on the market you have (long or short), there are 2 types of Stop Order:a) Sell Stop OrderThis is the stop order (to limit losses or to lock in profit)...

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How To Effectively Use Stop Loss To Protect Your Capital And Lock In Profits

As mentioned in the earlier post, a Trading System should be able to answer the following questions:a) What stock to enter.b) When to enter (Entry strategy).c) How much to enter per position d) When to exit (Exit strategy).While many people place too much emphasis on the entry, they don�t really know when to exit. Actually, a trader should focus more on exit strategy than on entry strategy. Exit strategy is much more important than Entry strategy.There are 2 types of exits a trader must consider to be parts of his trading system:* When to exit on your losing position (i.e. Where to put your initial stop loss).* When to exit on your profitable position (i.e. When to take your profit).Trader�s Blog has previously discussed further and even posted a video about various Stop Loss strategies to...

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Understanding Option's TIME VALUE

I�ve previously written a number of posts on Option�s Time Value. Understanding the behavior of time value is very important in options trading.For your convenience & easier future reference, I put the links of all posts on this topic below, and place this on the top left corner Click the following links to read each of the posts:1) More Understanding about Options Time Value2) Main Factors that Affect Option�s Time Value3) Option�s TIME VALUE � Putting It Together:a) Part 1: Understanding What It Isb) Part 2: Main Factors � Degree of Options Moneynessc) Part 3: Main Factors � Implied Volatility & Time to Expiration d) Part 4: BehaviorRelated Topics:* FREE Trading Educational Videos You Should Not Miss* Options Trading Basic � Part 1* Options Trading Basic � Part 2* Understanding Implied...

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Trading Video: Double Tops and Pivot Points Explained

A number of readers asked me if I�m going to write about reversal patterns (such as Double Tops / Bottoms, Triple Tops / Bottoms, Head & Shoulders Tops / Bottoms, etc.), as so far I only have posts on continuation patterns.The answer is yes, it�s on my plan. While the articles on reversal patterns are still under preparation (coming soon, I promise), I found a cool trading video, which shares about Double Tops pattern.Double Tops is one of the most frequently seen and common patterns, which can be traded in different time frames.This video gives an example on Double Tops pattern under 15-min chart for S&P 500 on 6 Apr 09.Hope you can learn something from this video.Note:Got this video from Trader�s Blog. It�s a great blog.If you like it, you may want to subscribe to their updates,...

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Happy Easter 2009

"He himself bore our sins in His body on the tree, so that we might die to sins and live for righteousness; by His wounds you have been healed." (1 Peter 2: 24)HAVE A HAPPY & BLESSED EASTER 2009!May this Easter reminds us of His love in our life. GOD bless y...

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Option�s TIME VALUE � Putting It Together � Part 4: Behavior

The Behavior of Time ValueAs mentioned in Part 3, the Time Value component of an option price will decline or �erode� as expiration is nearing (i.e. Time Decay).The rate of decline of option�s time-value resulting from the passage of time (i.e. rate of Time Decay) is known as THETA, which is one of the Options Greeks.Comparing Theta at a certain point of time between ATM (At-The-Money), ITM (In-The-Money) & OTM (Out-of-The-Money) options, Theta is typically highest for ATM options, and gradually decreases as options move towards ITM and OTM.This is understandable because ATM options have the highest time value component, so they have more...

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