If we want to take charge of our finances by trading in the stock market, or if we want to use an internet-based broker to trade with our money, it is important to know exactly what stock orders are.

Orders are the instructions customers will give their brokers (or electronic broker) to buy or sell stock on the exchange. There are a number of different orders, which allow us to have a tighter control over the transactions we make. They can be very simple or complicated and they can restrict the transaction either by price or by time.

Market or Open Order – This is the simplest and, most likely, the cheapest of the orders and it is the instruction to trade stock immediately at the current market prices, no matter what that price is.

Limit Order – This is the instruction which tells your broker to buy a security at not more, or sell at not less, than a specified price. In other words, you tell your broker the amount you want to sell for, or the amount you want to buy for, it is a fixed price order. Be aware that you might have to pay a higher commission to place this order than a Market Order, so it may make more financial sense to just place a simple Market Order.

Buy Limit Order – This is the instruction that a buy order can only be executed at the limit price or lower.

Sell Limit Order – This is the instruction that a sell order can only be executed at the limit price or higher.

Good-Till-Cancelled Order (GTC) – This is the order which is used in conjunction with other orders and it instructs your broker to keep the order active until you cancel it. It is a specific canceling order and some brokers may have limits on how long you can keep a Good-Till-Cancelled order open.

Day Order – The contrary of Good-Till-Cancelled Order and the most common of all the Orders. A Day Order is a market order that is in force from the time it is submitted until the time the market closes.

Immediate-Or-Cancel Order (IOC) – This is the instruction to immediately cancel an order. These orders allow for partial fills, which means they can instruct to immediately cancel a part of the order, it does not have to be the whole order.

Fill-Or-Kill Order (FOK) – These are normally limit orders that must be cancelled immediately and they require the full quantity of the order to be executed.

Stop Order or Stop Loss Order – This is an order to buy or sell a security once the price of the security has climbed above or dropped below a specified stop price. This works in the following way, your broker will place a stop order at a point below the current market price, if the stock falls to the stop order level, the stop order will become a market order, and the broker will sell the stock. This order protects you against losses. There are different types of Stop Orders that fulfill different instructions. Buy-Stop Order will be used to limit a loss on a short sale. The buy stop price will always be above the current market price. A Sell-Stop Order will instruct to sell at the best available price after the price goes below the stop price. A Stop-Limit Order combines a Stop Order and a Limit Order, once the stop price is reached, the Stop-Limit Order becomes a Limit Order to buy or sell at the pre-specified limit price.

Trailing Stop Order – This is a similar oder to the Stop Orders but its function is to protect your profits. The Trailing Stop Order is entered with a stop parameter, such as a percentage change or the rise or fall in the security price. When the parameter is reached, the trailing stop order will turn into a market order to sell the stock. For example, if the trailing order is set at $1.00, the market order will be activated when the stock falls by $1.00. However, if the stock rises, the Trailing Order will follow it up, only becoming a market order if it falls by $1.00, or whichever parameter is chosen. There are a few variations of Trailing Stop Orders. Trailing Stop Limit Order this is like the Trailing Order however instead of becoming a Market Order when triggered, this order becomes a Limit Order. Trailing Stop Trailing Limit Order is the most flexible possible order.

One Cancel Other Order – This is an order used when the trader wants to capitalize on one of two or more possible trades. This order will be composed of two parts giving a set of instructions each, whichever instruction is reached first, it would be carried out and the other instruction would be cancelled.

All of these orders can also be placed on the Electronic Markets. However the Electronic Markets have rules which state the priority of the different orders. Market Orders have the highest priority, followed by Limit Orders, therefore those are the orders preferred in the Electronic Markets.

Author Bio: Follow D. Wood\’s blog for all your trading information and tips, or if you want to learn about trading with stocks, check out our very complete course.

Category: Finances
Keywords: learn to trade, learn stock market, train to trade stocks