In order to buy or sell stock, an investor must place an order to do so through an online brokerage platform or by calling the brokerage firm on the phone. An order represents an advertisement of intent to buy or sell a specific stock. Each order is unique and has identifying characteristics relating to price, quantity, and conditions. An order is considered to be “opened” or “pending” until it is finally executed and completed. The five conditions that need to be specified in an order are:
I want to focus a bit on item number 5 as there are two kinds of pricings available.
An investor that has purchased a stock has entered what is known as a “long position”. An investor that has sold short a stock has entered what is known as a “short position”. When an investor does not have a long or short position this is known in trading jargon to be “flat”. Every time the price of the stock changes this incurs an “unrealized profit” or “unrealized loss” which represents a realistic view of how much profit or loss would be made if the position were to be closed at that time. Once you are flat the unrealized profit or loss becomes a “realized profit or loss”.
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