Spread Betting Guides: Trading Tickets and Opening Orders
Published: 18 May 2011 By MoneyhighStreet Staff Leave a Comment
Our spread betting guides have given you some strategies for making money in the markets, but you can’t put those strategies into action without actually placing trades and orders.
On most of not all spread trading platforms you will find two buttons that allow you to deal in the stock, index, commodity, or other financial instrument: the Trade button and the Order button.
So what’s the difference, and why does it matter? Let’s find out.
When you click the Trade button, the trade ticket typically displays the current market buying and selling prices along with just two buttons to BUY long or SELL short your chosen stock immediately at the current price.
Depending on the spread betting platform, the trade ticket may also let you specify at the same time a stop-out price as protection against the trade going bad, but the key point is that a trade ticket allows you to buy or sell a security immediately.
So far, so simple.
As we saw when getting into the swing with limit orders, some trading styles rely on entering or exiting trades when a particular price is reached rather than entering or exiting at whatever price the market is currently offering. Some traders – the ones with “day jobs”, which probably includes you – simply cannot place live trades during market trading hours, so they spend their evenings or weekends researching stocks and lining up their trades for future execution.
In both of these scenarios, the spread betting trader would click the Order button so as to fill out an electronic order ticket like the one (not real) shown here:
A swing trader would use this kind of order ticket twice, to place two Limit orders: one to buy at the bottom of a stock’s trading range, and one sell at the top of the trading range. A limit order to buy must be at a lower price than the current market price and a limit order to sell must be at a higher price than the current market price, which is why the trader in this ‘limit order to sell’ example is being warned that the
Target price is wrong side of current market price!
Either he meant this order to be a limit order to buy when the price falls to 18.99 or he’s entered the wrong price target for his limit order to sell. As it stands, this order (if allowed) would execute immediately as a live trade rather than a future order – which brings us to the essential difference between trades and orders:
A trade is an instruction to buy or sell now.
An order is an instruction to buy or sell in the future when a particular price is reached.
So much for the swing trader; but swing trading is not the only spread betting style. A longer-term position trader might conclude that when his favorite stock breaks upwards out of its current trading range then it will keep on rising. He uses the order ticket to place a stop order to buy at a price just above the current trading range (and necessarily above the current market price). If the target price is reached before his Good Until order expiry date, a new long position will be opened automatically for him while he’s busy doing the day job.
About the Author
Tony Loton is a prolific trader and financial writer, and author of the book “Position Trading” published by LOTONtech.