Trading FAQ's

We provide a comprehensive list of questions that are commonly asked by our clients and potential clients. If you cannot find an answer in these pages, please feel free to contact us.

  1. What is a market order?
  2. What is a limit order?
  3. What is a stop order?
  4. What is a stop limit order?
  5. What does "all or none (AON)" mean?
  6. How are commissions calculated for orders that are executed with multiple fills?
  7. Can I place orders after market hours?
  8. What is a "good faith violation"?
  9. Can I overspend my account?

What is a market order?
A market order does not specify a price instead it is to be executed at whatever price is available when the order reaches the floor. A market order will always be executed, but customers cannot be sure of what the execution price will be.
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What is a limit order?
A limit order is used to buy or sell securities at a specific price. It can only be executed at the specified price or better. A buy limit order could be executed at the limit price or lower, and a sell limit order could be executed at the limit price or higher.

For example, lets say you place a limit order to buy 100 shares of MSFT at 109.25. The order may not be executed unless the stock can be purchased at 109.25 or below. If the order was to sell 100 shares of MSFT at 109.25, it could not be filled unless the sale price was 109.25 or above. A limit order has the advantage of letting you determine the price. However, it won't get filled unless the limit price is reached.
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What is a stop order?
A stop order becomes a market order to buy or sell securities once a specified price is attained or penetrated. The specific price indicated by the investor is called the stop price. Once the order is activated, the investor is guaranteed execution, but there is no guarantee of the execution price. A sell stop order is always placed below the current market price of the security. It is typically used to limit a loss or protect a profit on a long stock position.

For example: Mary Smith purchases 100 shares of XYZ stock at 25. She determines that she would like to limit any losses to approximately 5 points and enters a sell stop order at 20. If the stock trades at or through $20(the stop price), the sell stop order is triggered and becomes a market order to sell 100 shares of XYZ. This illustrates how the sell stop order may be used to limit a loss on a security. Assume that instead of declining in price, XYZ stock goes up to $35. Ms. Smith decides to protect this profit by entering a sell stop order below $35, in this case at 33. If the stock trades at or through $33, the order is activated and Ms. Smith will retain a portion of the appreciation.
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What is a stop limit order?
A stop limit order is similar to a stop order in that a stop price will activate the order. However, once activated, the stop limit order becomes a buy limit or a sell limit order and can only be executed at a specified price or better. It is a combination of both the stop order and the limit order. A sell stop limit order is always placed below the current market price of the security. It is used to limit the loss (or protect a profit) on a long position. Once activated, it becomes a sell limit order.

For example: An investor purchases 1000 shares of XYZ at 15 and places a sell stop limit order with a stop at 10 and a limit of 9. If the stock trades at or below $10, the order will be activated and become an order to sell 1000 shares of XYZ at $9 or better. Unless the limit price can be satisfied, this order will not be filled.
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What does "all or none (AON)" mean?
When an order is placed with the AON qualifier, it is only filled if the market maker can give you all of the shares you request at the price you request. For example, if you placed a limit order to buy 10,000 shares of ORCL at 55.25, this order would only be filled if the market maker was willing to sell 10,000 shares at 55.25 in a single order fill.

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How are commissions calculated for orders that are executed with multiple fills?
The total commission for a trade is broken down into two separate pieces: a share fee and a daily execution fee. For a Canadian security, executed within a single trading day, the total commission would be $34.95. This $34.95 consists of a $16.95 share fee and an $18.00 daily execution fee. For a US Listed security, executed within a single trading day, the total commission would be $19.95. This $19.95 consists of a $1.95 share fee and an $18.00 daily execution fee.

If an order is completely executed within a single trading day, only a single daily execution fee will be charged. If an order is executed over multiple trading days, a daily execution fee will be charged for each day the order receives fills.

Examples of the commission structure on partially filled orders are shown below.

Example A: An order to buy 1000 shares of XYZ-T at $10. The order is filled in 3 pieces, all within the same trading day. The total commission would be calculated as follows:

  • Fill #1 on March 3rd | Share Fee = $10.17 (600 of 1000 = 60% of $16.95)
  • Fill #2 on March 3rd | Share Fee = $3.39 (200 of 1000 = 20% of $16.95)
  • Fill #3 on March 3rd | Share Fee = $3.39 (200 of 1000 = 20% of $16.95)
  • Daily Execution Fee for this trade on March 3rd = $18.00
  • Total commission paid = $34.95


Example B: An order to buy 1000 shares of XYZ-T at $10. The order is filled in 3 pieces, on two different trading days. The total commission would be calculated as follows:

  • Fill #1 on March 3rd | Share Fee = $10.17 (600 of 1000 = 60% of $16.95)
  • Fill #2 on March 3rd | Share Fee = $3.39 (200 of 1000 = 20% of $16.95)
  • Fill #3 on March 4th | Share Fee = $3.39 (200 of 1000 = 20% of $16.95)
  • Daily Execution Fee for this trade on March 3rd = $18.00
  • Daily Execution Fee for this trade on March 4th = $18.00
  • Total commission paid = $52.95

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Can I place orders after market hours?
Orders can be placed from 8:00 AM EST to 4:00 PM EST Monday - Friday (excluding holidays).
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What is a "good faith violation"?
Our clearing agent enforces the following regulatory policy concerning unsettled funds:

Your account will be charged with what is called a Good Faith Violation (GFV) if you buy a security in a cash account and then sell that security to buy another before the first trade settles. Note that trades settle on the third business day after they are executed.

Here is an example of a Good Faith Violation:

  • On Monday customer sells security A for $5,000, but has no cash in his account
  • On Monday customer buys security B for $5,000
  • On Monday, Tuesday or Wednesday customer sells B, prior to the settlement date of A

In this example, the account was charged with a GFV because the settlement date of security A is Thursday. On the other hand, if the customer had sold security B after settlement of the sale of A on Thursday, then the purchase of B would have been "fully paid" and not a violation.

If you have three GFVs in any rolling twelve-month period your account will be restricted to "Funds in Advance" for 90 days. Funds in Advance policies require that before any trade can be executed, your account must hold:

  1. The money to cover your purchase, or
  2. the stock to be sold

Also, Funds in Advance trades must be handled by a broker at broker commission rates.

If an account trades through a 90-day restriction, any resulting loss will be your responsibility and your account may be coded for "No More Business."

We greatly appreciate your understanding of this regulatory compliance matter. If you have questions, please contact us.
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Can I overspend my account?
Penntrade online accounts are cash accounts. Penntrade's Online trading system generally will prevent over-spending your account. However, it is important to note the following: PRIOR to placing an order in your Penntrade account, you, the client, are expected to deposit enough funds to pay for the transaction in full.

If a position is purchased and sold in a cash account without being fully paid for, Regulation T of the Federal Reserve Board requires the account to be restricted for 90 Days. You will not be able to place trades on the Internet for 90 days. You will have to phone your orders in at a broker-assisted commission rate.

Note: If the security is bought and sold with out being fully paid for, but the money is received by the buy-side settlement date, the restriction can be lifted. Ultimately, the resposibility to know your balances and buying power is yours.
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