Order Types

The following are the types of orders generally available:

  • Market Order - An order to buy or sell stock immediately at the best available price for the number of shares specified. Typically, brokerage houses will guarantee the execution of the order; however, a guarantee in price is not given. Market buy orders are usually filled at the prevailing ask (selling) price, as long as there are enough shares available to complete the order. Conversely, market sell orders are typically executed at the bid (buying) price, as long as there are enough buyers to fill the order. Because there are no guarantees to execute the order at a specified price, it is possible that the order is executed at a price that is very different from the level at which the stock is trading at the moment the order is sent. This “slippage,” or difference in price from the moment the order is sent, to its actual execution, typically occurs during periods of volatile or fast moving markets. Slippage is also common in market orders that are sent on stocks that are less liquid in trading.
  • Limit Order - An order to buy or sell stock at a price specified by the customer. The broker will make an attempt to immediately buy or sell at the price specified, however, does not guarantee that the order will be executed. Limit orders are especially useful in volatile or fast moving markets, where market orders have the possibility of getting filled at extreme price levels, beyond the expectations of the customer. Limit orders are also used by traders to anticipate buying or selling a stock, if the market reaches a level that is attractive.
  • Stop Orders - Dormant orders that are triggered and become active only if and when the stock reaches a price specified by the customer. Stop orders are typically used by investors to control risks in the event that the price of a stock moves to a level at which he wishes to close a trade. This is usually done in an effort to limit losses or protect gains.
    • Regular Stop Order - A market order to buy or sell a stock only if it trades at or beyond a price specified by the customer.
    • Stop Limit Order - A limit order that is executed to buy or sell a stock only if it trades at a price specified or better by the customer.
  • Time and Size Conditions - An order to buy or sell a stock with a time limit set by the customer. Time Conditions are typically referred to in the industry as:
    • Day Order - A day order that is good only for the regular market trading hours, and is cancelled at the end of the trading session if not executed. This is the most common time limited order.
    • Good Till Cancelled (GTC) Order - An order that remains open until filled or cancelled by the customer (Some brokerage houses set limits to this type of order after 30 or 60 days. Check with your broker to be certain).
    • Immediate or Cancel (IOC) Order - This is an order that must be filled immediately in its entirety or as a partial fill or be cancelled.
    • Fill or Kill (FOK) Order - This order must be filled immediately in its entirety or be cancelled. (Partial fills are not acceptable).
    • All or None (AON) - An order that must be filled in its entirety or be cancelled (does not have to be filled immediately).
    • Market on Close (MOC) Order - An order to buy or sell stock at or near regular session closing.
    • Minimum Quantity - An order to buy or sell a specified number of shares at a price contingent upon a minimum number of shares to be filled in the event of a partial fill.
    • Do Not Reduce - To instruct your broker not to reduce the price of your limit order in the event that a stock goes ex-dividend, and the prevailing price of the stock is reduced by market makers by the amount of the dividend.
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