Dow Jones 7808.08 +158.93 11:30 am PST, February 16, 2003  NASDAQ 1310.17 +32.73 For info, visit access.smallcapnetwork.com S & P 500 834.89 +17.52 To be removed, please click here Russell 2000 358.50 +3.73 VOLUME 02: ISSUE 98 Disorderly Conduct Ever been violated by a specialist on the NYSE or a Market Maker on the NASDAQ? Sure you have. It's all part of the game and it's likely your own fault. Before we chat about some of the types of orders that can be employed to buy, sell or short your favorite stock, I have one word for you: liquidity. Simply put, the more shares of a particular stock that trade per day, the greater the liquidity and, by extension, the ease with which you can execute your order. If the object of your desire trades only a few hundred shares a day, the possibility that you will either not be able to trade at a price that pleases you or not trade at all, rises exponentially. That said, care should still be taken when trading even the most liquid stocks. Getting caught in a nasty updraft or downdraft in a share price going against your ill-defined order can leave a nasty mark.  Get in Line, Buddy.... Different order types have significantly different characteristics. However, with some planning and vigilance, you needn't be completely at the mercy of a system that appears to favor the house. Your order strategy is almost as important-if not more so-than the fundamental reasons for buying (or selling) a stock.  The path of least resistance is the Market Order. It's also the most dangerous. When you place a Market Buy order, you are telling the marketplace that you are willing to purchase the stock at around the current trading price, ASAP. Trouble is, once that order is placed, it gets in line with all the other market orders placed before yours. It will be filled at the then market price when all the ones ahead of it are filled. That means that if a hot stock you want to buy is trading higher and higher and you are way back in a long line of market orders, you will be executed (ironic term, really) when it is your turn. If all the stock being offered for sale around the price you want to pay is sold ahead of your order, and the price gaps up, you will find that you'll own it at significantly different price than the one with which you were initially comfortable.  Simple? Yes. Smart? Probably not. Market orders give control to the marketplace. Never a good place to find yourself.  If you don't care about the price, use Market Orders. But be warned I have yet to meet a trader (or investor) who doesn't care about price.  Market orders will usually be filled before orders with conditions, such as a Limit Order, to which I will now brilliantly segue. I Got What Price? If you have a price in mind, use a Limit Order. This type of strategy is used to tell the marketplace that you will buy (or sell, if you're a seller) the stock at a specific price. The caveat here is that if you place your limit too far away-say, a couple of dollars-- from the current market, you might not get executed if the stock doesn't move. Further, if you're a buyer and the stock gets down to your purchase price and there is not enough stock offered there to satisfy all the buy orders, it may fill the orders ahead of yours and bounce higher, also leaving your buy order unfilled. Unlike a market order, though, with a limit order, you will never trade the stock at any price other than at your desired limit, or better. If the shares gap away from your order, you're protected. While you may miss the trade, this strategy takes out the emotion that can cost you big-time if the market goes against you, quickly.  Make it Stop! Now it gets a little more complicated. Say you own a $30 stock and want to establish a sell price because you think the market or your shares might get waxed. A simple Stop Loss order is one where you place an order at a specific price that's lower (or higher in the case of a short sale-we'll speak of this next week) than the current market. Good in theory, but if a stock trades down to your price, the stop loss becomes a market sell (market if touched) order and if the shares then gap above or below your stop loss price, that's the price you'll get. You might have wanted to sell at, say, $20, but if the market touches that price and the buyers or sellers dry up before your order can be executed, it could gap and you'll sell at market, which could be a much different price than you originally chose. In volatile markets the risks can be nasty. October 1987? 9/11? George W. Bush? Internet Bubble? You get the point. Always Use Protection You can protect yourself somewhat by adding a limit to your Stop Loss Order. Say you thought you'd only sell your $30 stock should it trade down at $20. Once the market trades there, your order becomes a limit order-as opposed to becoming a market order as noted above-and if the shares trade at $20, you may or may not get executed at that price or better in the same way as the straight Limit Order.  The good news-sort of-- is that while you might miss the $20, you won't be executed at anything lower. Understand though, if the shares drop quickly below your stop loss limit order and you aren't executed, as your limit is $20, the price could, theoretically, go to zero and you would still be holding the shares. A stop loss limit order looks like a limit order, but it alerts the market as to your intentions and conditions of sale. Check, and Check Again Due to the competitive Market Maker system at NASDAQ, I don't believe that it accepts stop loss or stop loss limit orders. Check with your broker-live or online-- as some have systems that will simulate these strategies for you. The foregoing merely begins to discuss some of the various ways you might buy, sell or short a favored stock. There are numerous other considerations such as Day Orders, GTC (Good-till-cancelled) and orders with price discretion. Make sure that you have the discussion with your broker or online trader as to the nuances of each, and that you fully understand them. The type of order placed is ultimately and always your responsibility. The broker will do as instructed and the market doesn't care if you make a mistake. Don't give the market anymore of your money than you have to. It's likely taken enough already. So what if you miss a trade? There'll be another one along in short order. FYI... Next week we'll talk about the kinds of orders that provide the most protection. Nothing is 100 percent, but stacking the deck more in your favor will make the trading process a lot less painful. Also, in our coffee piece last issue, it was noted that Peet's Coffee and Tea (PEET: NASDAQ) doesn't have any retail stores. It does, and plans to expand the number. Doesn't change the nifty outlook for the coffee sector, but bears correction. Thanks to the readers who took the time to correct us. We appreciate it. D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker-dealer. 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