In 1999, Warren Buffett, the CEO of Berkshire Hathaway, was one of the world's most respected investors. He had made a fortune investing in solid companies with good fundamentals.
At the time, Coca-Cola stock was trading at $65 per share. Buffett believed the company was a good investment, but he was unwilling to pay the current market price.
So he used a limit buy order to buy Coca-Cola stock at a price of $52 per share. We're talking about a 20% discount to the market price.
Buffett's order was executed in 2000, when Coca-Cola's stock price fell to $52. Buffett managed to buy 5.4 million shares of the company, worth $286 million. He has maintained his stake in Coca-Cola ever since. The company's shares have outperformed the market since then, earning Buffett a huge profit.
In case you had any doubts about whether limit orders can actually be useful for making profits. By setting a limit price, traders can ensure that we buy or sell shares at a price we think is fair.
What should I focus on to become a success story?
Your investment strategy: Do you want to buy or sell stocks quickly, or do you want to control the strike price of your trades? Consider well the size of your investments according to the possible gains.
Your objectives: Do you want to manage risk or take profits automatically?
Consult and get the right advice from experts. Lean also on your community and compare projections, and try to classify your objectives in short, medium and long term. They may change or evolve, but sometimes it is easier to respond to change by adjusting on a plan already made than starting from scratch (especially in times of high pressure).
Study and choose well the type of asset you are going to trade: Some assets, such as stocks, are more volatile than others, such as bonds. Take into account liquidity and all the factors that influence your trades. Determine all the elements that could affect the probability that your order will be executed at the desired price.
Pay attention to commissions: Limit orders may carry higher commissions than market orders. Be alert and ask your community for recommendations.
Remember that market orders can be applied in any financial market, including:
Stock exchanges: stocks, bonds, futures and other financial instruments.
Foreign exchange markets: Currencies from around the world.
Commodity markets: such as oil, gold, cotton, natural gas, etc.
Some books you can take advantage of
Remember to harness the power of AI to optimize your reading. There are many tools available to search for summaries, if reading is not exactly your thing.
And you can always share your impressions, doubts and input with us.
Thomas A. Bass's "The Book of Trading Orders".
A classic reference for any trader who wants to learn about the different types of trading orders and how to use them. Covers all aspects of trade orders, from the basics to advanced strategies.
"Stock Orders: A Complete Beginner's Guide" by Jason Bonds.
Excellent choice for beginner traders who want to learn in a simple and easy to understand way. It has interesting practical exercises.
"Trading Orders: How to Use Them to Make Money in the Stock Market" by Michael C. Thomsett
The best thing about this book is the wide range of trading strategies, with examples and practical tips that come from Thomsett's experience and background.
The success of any order depends on a number of factors, such as market direction, liquidity of the asset, etc... but the focus here remains your strategy. That, along with your knowledge, is the real key to building results.
Are you interested in taking advantage of all the innovative resources of AI and/or becoming a certified pro-trader in the USA?
You're in the right place, let's go for those results!
For this article, prompts have been used to request information
interpreted and provided by AI (Google Bard). Written and edited
by Kevin David Terán and verified by Pedro Arizaleta and Erwin Sánchez