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Navigating Buy and Sell Orders: A Beginner’s Insight

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Nerdy wrote a column · Yesterday 01:31
I began my investing journey in July 2024 with minimal knowledge of trading and market dynamics. While I understood the basics of buying low and selling high for profit, I quickly learned that successful trading also involves covering transaction fees. Before exploring the different types of buy and sell orders, I’d like to highlight a few key lessons I’ve learned:
1. identifying the right stocks and ETFs (so that money is invested in stocks/ETFs that grow with time),
2. setting risk tolerance and return goals (navigating through market uncertainties and aiming for returns that outpace inflation and interest earned through savings account),
3. practicing patience (focusing on learning and utilizing paper trading can deepen your understanding of how market fluctuations impact potential returns), and
4. avoiding impulsive trades (gradually learn about financial tools and indicators that can help in better decision making) are all crucial for success. The Moomoo community offers many helpful resources to support this learning process and hopefully lead to financial gains for everyone.
I embarked on my investing journey by depositing a small capital of AUD 2,000 to take advantage of Moomoo's offer of 10 free stocks. My target was to achieve returns of 10% per annum, which is double the interest rate offered by major Australian banks on fixed savings accounts. As a beginner, selecting the right stocks felt overwhelming, especially since I was unsure how to determine if prices were low enough to buy. To ease into trading, I started by taking trades in paper trading account of companies that I recognized and understood and gradually explored other companies that were trending and had potential for growth. In a paper trading account, there are two types of orders for buying and selling stocks: 1. market orders and 2. limit orders (see image below).
Navigating Buy and Sell Orders: A Beginner’s Insight
A limit order allows us to specify the exact price at which we want to buy or sell a stock or ETF. We can set our desired price and quantity of shares before submitting the order. The order will execute only when the stock price reaches or surpasses the set price (allowing us to buy at a lower price and sell at a higher price compared to the current market price). If the price doesn’t reach our specified level, the order will remain unfilled. In contrast, a market order executes at the current market price of the stock or ETF, requiring only the number of shares as input. Market orders are typically filled instantly; however, the execution price could be higher than expected, leading to increased buying costs.
Reflecting on my journey, I began with a long-term investing approach by purchasing the $Vanguard Australian Shares ETF (VAS.AU)$ using a limit order set at AUD 96.78. My order got filled up after 30 minutes when the market price reached the set price (see the image below). I chose to invest in ETFs because they offer a straightforward way to diversify my investments in the Australian market, which helps mitigate risk, especially as a newcomer with limited knowledge of which Australian stocks perform best. Additionally, I’ve expanded my portfolio to include stocks and ETFs from the U.S. market, which generally offers better returns than the Australian market, further diversifying my investments.
Navigating Buy and Sell Orders: A Beginner’s Insight
There are additional variations of limit and market orders that can be tailored to our needs (see the image below).
Navigating Buy and Sell Orders: A Beginner’s Insight
One of my favourites is the Limit-If-Touched order, which triggers a limit order once a specific price point is reached. For instance, this is particularly useful for opening/closing positions in potential value stocks, such as gold, which tends to perform well during interest rate cuts. You can use financial indicators to estimate potential price pullbacks and rise, allowing you to set a target for your purchases or sell by using a Limit-If-Touched order which continuously tracks price and enables you to enter the market or exit position at a price that aligns with your investment goals.
Overall, during my three-month journey, I have increased my initial investment from AUD 2,000 to about AUD 20,000, gaining confidence from my learnings and the returns I've achieved so far. I’ve also managed to gradually increase my monthly returns, largely due to the growth in my investment capital. However, I’ve made a few mistakes, such as buying shares of many companies with only one or a small fraction of a share, which increased my transaction fees, and selling some shares prematurely, resulting in losses. I hope to learn from these experiences and continue improving my investment journey.
Navigating Buy and Sell Orders: A Beginner’s Insight
Disclaimer: The above is my opinion and not a recommendation to invest in any particular stock or ETF. If required, please seek professional financial advice before making any investment.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more
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Nerdy
Eager to learn trading & smart investing
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