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A Guide to the Different Types of Stock Orders

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Stock order through online brokerage

While some investors choose to work with a financial advisor who invests on their behalf, others choose to take a DIY approach, buying and selling their own stocks. As you know if you’ve ever tried to buy stock, though, there are different varieties of stock orders. Some orders execute immediately; some execute only at a specific time, or price; and others have additional conditions attached. What kind of order you use can make a big difference in the price you pay and the returns you earn, so it’s important to be familiar with the different types of stock orders.

Market Order

A market order is when an investor requests an immediate execution of the purchase or sale of a security. While this type of order guarantees the execution of the order, it doesn’t guarantee the execution price. Generally, it will execute at (or close to) the current bid (sell) or ask (buy) price. Investors can provide either simple or complex market order instructions, which brokers or trading market venues can access.

When executing a market order, investors don’t have control over the final price. The execution of the stock order correlates to the availability of buyers and sellers. Depending on the pace of the market, the price paid or sold may drastically vary from the price quoted.

It’s also possible to split market orders. Splitting market orders may result in multiple price points, caused by several investors’ participation in the transaction. Since most market orders are typically simple, online and traditional brokers may receive a minimal commission.

Limit Order

Limit orders execute at a specific price

If you’re looking to execute an order at a specific price, you’ll want to complete a limit order. With a limit order you determine a certain price you want to purchase or sell a security for. The order is only executes when you have a buyer or seller that will pay or sell a security for that price.

A buy limit order only executes at the limit price or below. For example, if an investor would like to purchase Apple Inc. for no more than $195 per share, the investor would place a limit order. Once the share price reaches $195, the order executes. While a sell limit is similar, it’s only executed when the stock reaches the limit price or exceeds it.

Limit orders can also have additional requirements such as fill or kill (FOK) or all or none (AON). When requesting a FOK, the order either executes right away or is completely killed. With an AON request, the entire order is filled or not filled at all. If the order is not filled, the request will remain in the book until the order is completed.

Time in Force

If you want to indicate how long an order will stay active, you’ll want to use a time in force order. For example, day order or good for day orders (GFD) are orders where the investor would like to buy or sell a security during a certain timeframe. Once the investor requests the order, it will expire after a specified time during the day. These orders are only valid during the day they’re requested in. If time in force orders are not executed during the day, they’re canceled at the end of the trading day.

Investors can also request good-til-canceled (GTC) which requires certain cancelation criteria continue indefinitely. Another request option is an immediate or cancel order (IOC) which executes or cancels the order instantly.

Conditional Orders

Conditional orders allow investors to set triggers for securities. These options center around the price movement of securities, indexes and other option contracts. An investor can select trigger values, security types and timeframes for the execution of their orders. Here are some of the most common conditional orders you may use when trading.

Stop Order

The intention of a stop order is to limit the investor’s loss from a transaction. Investors usually request buy stop orders to limit their loss or protect their profit if they have shorted a stock. Investors may use a sell stop to minimize their loss or protect a profit on a security they own. Some of the most common stop orders include:

  • Sell-stop order: The instructions for a sell-stop order are to sell at the best price available, once the price drops beyond the stop price.
  • Buy-stop order: Similar to the sell-stop order, the buy-stop order is a safeguard in place to limit a loss. If an investor shorts a stock, they may want to place a buy-stop order to minimize their profit loss.
  • Trailing stop order: Entering stop parameters that yield a moving or trailing price is a trailing stop order. Trailing stop orders maximize profit when prices go up and decrease loss when prices go down.
Market-if-Touched Order

A buy market-if-touched order is an order that requests a buy at the best available price, or the  “if touched” level. If the security price drops to this level, the order becomes a market purchase order. Whereas with a sell market-if-touched order, the sale occurs when a buyer wants to pay the “if touched” level.

One Cancels Other Orders

Investors can use a one cancels other order when they want to capitalize on one of two trading options. For instance, if an investor wishes to trade ABC stock at $100 per share or XYZ stock at $50 per share, the one who reaches the designated price first will be the one that occurs. So, if ABC stock reaches $100 per share, the order is then executed and the order for XYZ stock is canceled.

One Sends Other Order

One sends other order is when an investor wishes to send another order once their previous order is complete. For example, if a trader wants to buy ABC stock for $100 per share and then whats to turn it around and make a profit, they would need to complete a two part order. The first part is a limit order for the purchase of ABC stock at $100 per share. The second part would be to sell ABC stock at $105 per share. Multiple orders go into the system simultaneously and are then execute in a sequential manner.

Tick-Sensitive Orders

A tick-sensitive order is a stock order that’s conditional on an uptick or downtick. Investors can enter any tick-sensitive information for traders to complete. An example of this order is to buy on a downtick.

At The Opening Order

If an order lists the contingency at the opening, then the order must be one of the first trades of the day. If the order doesn’t execute right away, after the opening bell, then the order will not move forward.

The Takeaway

Buying your own stock

Before you start buying stock, it’s important to understand the vocabulary of the investing world. Perhaps no lingo is more important than that which surrounds the different types of stock orders. Depending on whether you want to make a transaction immediately or wait until certain conditions have been met, you’ll need to place a different kind of order through your brokerage.

Tips for Investing
  • Want some professional help navigating the investing world? A financial advisor can help you put together an investing strategy that fits your financial plan. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • If you’re going to start investing, you should always maintain a diverse portfolio. Mix it up with different kinds of stocks and bonds. That way, should something happen, you won’t lose everything. A financial advisor or an asset allocation calculator can guide you to the right balance.

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