What is Over The Counter (OTC)?
The operations in the stock market are the result of opening an account in a brokerage house. These accounts are opened in two forms i.e. Cash account and margin account. In cash account you purchase or sell share in your account as per the balance in your account. In margin Account you can purchase or sell shares above your account balance depends on credit availability. Once you open an account in Investment bank then you instruct your banker or your agent to act according to your instructions. Those instructions are called orders. So the major types of orders; include:
- Market orders
- Limit orders
- Special orders
Types of Orders
In market order the investor order his commission broker, agent to buy or sell a particular share at the best market current price. One of the key features of market order is that it provides immediate liquidity.
The limit order specify buying or selling price, it also specify the time duration. Higher the limit order higher will be the buying or selling price and time duration will be also specified.
Special order fall under two categories:
- Stop loss order: under the stop loss order the account holder specify a limit to sell a stock if it falls to particular price.
- Stop buys order: in this the investor who sold short may want to limit his loss. If the stock increases in price.
Forms of Accounts
In cash account you purchase or sell share in your account as per the balance in your account.
In margin account the brokerage house allows you a credit debit and who can purchase shares up to that credit limit. In other words you are borrowing from the brokerage house for example you open an account and your broker allows you 60% margin or 40% this means that you can purchase shares on these % credit.
November 24, 2018