Question

Suppose an investor needs to buy or sell a stock instantaneously and he wants to take advantage of momentum and capitalize on expected changes in price of that particular stock. What sort of order should he place under such scenario? Explain your answer

Answer 1

The type of order to be placed is – Market Order

In order to capitalize on the opportunities on the momentum trading , the trader needs to capture the right opourtinity on the momentum gain and instantaneous   sell the stock as soon as the momentum reverses .Thus the execution of such trades need instantaneous order execution and the Market order is the type of order to be placed in the trading terminal.

Reason are as follows :

No	Market Order features
1	Executes the order at market instantaneously
2	Executes the order at the best available market price
3	There is no chances of bad settlement as the best of the available bids and ask used for executing the order
4	Covers the order at CMP (Current Market Price)
5	Gets the first priority in execution in relation to Bracket and Cover orders