Order prioritization

Entry is a choice and exit a necessity. You may enter as you see fit, but you rarely have the luxury to exit on your own terms. In execution trader English, entries are limit orders while exits are stop or market orders. Long-only managers often struggle with cash balances. They need to know how much they can buy on a daily basis. A long/short portfolio has a few more moving parts than a classic long-only book. Things can get messy quite quickly. It is therefore prudent to set "right of way" for entries and exits. In execution trader English, exits always come first. Cash-depleting orders have the "right of way." This can be summed up as follows:

1. Buy-to-cover is the highest priority. It functions like a buy order. It depletes cash. Short-cover has an impact on long buying power and gross exposure. Buy-to-cover may in rare cases trigger margin calls.
2. Sell long is the second-highest priority. It frees up immobilized cash.
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