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We are here to discuss different types of orders. But let’s know the meaning of an ‘order’ first.
An order or stock order is an instruction given by the traders to their brokers to sell or buy shares of the companies.
Well, there are so many different types of orders in the stock market that can be used during trading. Types of orders in the share market can be broadly classified into 3 categories:
- Orders based on price
- Orders based on quantity
- Orders based on time duration
1. Orders based on ‘price’
1.1 Market Order
- It is an order to buy or sell shares immediately at the market price.
- A market order guarantees that the trade will be executed but does not guarantee the execution price as no one can guarantee the share price of the stock, the very next second you place your buy or sell order.
- The price at which shares are bought or sold is usually the LTP (Last Traded Price), but as stated the execution price cannot be guaranteed as the share price in the market changes within seconds.
- If you are placing a buy or sell order for a specified number of shares of a company and the market price at the time of placing the order is Rs. 200 then your order will be executed may be on Rs.200 or about 200 with a little plus or minus money i.e. Rs.199.95 or Rs.200.05
Example:
Buy Order:
If the LTP of a stock is Rs. 200 and you place a market order to buy the stock at this price. Your order would be executed immediately. However, there’s no guarantee that the share is bought at the same price of Rs 200.
Sell Order:
If the LTP of a stock is Rs. 200 and you place a market order to sell the stock at this price. Your order would be executed immediately may be at the exact price of Rs.200 or around 200.
1.2 Limit Order
- It is an order to buy or sell shares at a specific price and the price you decide to buy or sell the shares is known as the ‘Limit price’.
- If it is a buy order then your order will be executed at the limit price or lower than that and in case, if it is a sell limit order then the order will be executed at the limit price or higher than the limit price.
Example:
Buy Order:
If the LTP of a stock is Rs. 200 and you place a buy limit order with the limit price of Rs. 190 then it is sure that your order would not get executed immediately but when the price of the stock drops to 190 or lower than 190, then your trade will be executed.
Sell Order:
If the LTP of a stock is Rs. 200 and you place a sell limit order with a limit order price of Rs. 210 So whenever the share price of that stock increases from Rs.200 to Rs. 210, your order will get executed and it is sure that the price movement from Rs. 200 to Rs. 210 will take some time.
1.3 Stop loss Order
- A Stop-loss order or stop order is a type of order which is placed with the intention of “to stop your further loss” or “to stop loss of your profit”.
- As in Limit order, we have a limit price. A stop-loss order also has a ‘limit price’ but in addition to that it also has the feature of “trigger price”.
A trigger price is a price at which the placed order gets triggered and get listed in the order book. A trigger price is always kept between the Current market price and the Limit price. Trigger price is also known as "Stop price".
- As all orders are placed as a buy order or a sell order. So, here we also have 2 kinds: Buy stop order or Sell stop order. And you can place a buy stop order or a sell stop order, either as a limit order or a market order.
- A stop-loss market order is represented as “SL-M order” and a stop-loss limit order is represented as “SL order”. When you place an SL-M order, it becomes a market order when the price reaches the trigger price and in case, if you place an SL order, it becomes the limit order after the price reaches the trigger price.
Example:
Sell stop Order:
You place a sell stop order when you have shares in your Demat account and you want to sell them if their share price would drop up to the trigger price set by you. The intention behind placing a sell stop order is that you don’t want to sell the shares, which you’ve, immediately or after a specific period. What you want is that if the share price starts to fall below the price at which you bought those shares, shares will be sold automatically and in this way, you’re making sure to stop your further loss as if the market price is less than your buy price then you’re at loss.
Let’s say, you bought the shares of a stock at Rs.200 and you have them in your Demat account. You don’t want to sell them but you think that they should be sold out if the share price started to go down. So, you put an SL-M sell order having the trigger price of Rs.195. Once the share price will reach this price, your stop-loss order will become the market order and be sold out at whatever the market price will be at that time.
Buy stop Order:
You place buy stop order in 2 situations:
- One, when you short-sell a stock. Let’s say that you short-sell the shares of a particular company at Rs. 200 at 10 o’clock and you thought that you would buy the shares when the price would drop to Rs. 195 but after waiting for more than an hour, the stock didn’t show the price declination and was retained at and around Rs. 200. So, you decided that you will square off your position after some time. But you also have this fear, what if the share price rise above Rs. 200 if the price rises then you would be at loss. So, you put SL-M buy order i.e. a buy stop order having the trigger price of Rs.202. So, in case the price starts to rise beyond Rs. 202, your order would automatically get triggered and sold out at whatever the market price is. And that’s how you stop your further loss.
- Second, when you’re bullish about a particular stock but aren’t sure whether to buy it or not. So, you place a buy stop order with the intention that if the price of the stock rises to this level, it should be bought by the system for me as it could rise above that level too. Let’s say, a stock has a current market price of Rs.200 and after analyzing that stock you predicted that it could reach up to Rs.210. But you’re not sure enough to buy that stock. So, you placed an SL-M buy order with the trigger price of Rs.205 if the price reaches this mark, the stock would be bought for you. And by doing this you are stopping the loss of your profit because you have not bought the stock yet but you think that if the stock will be in your demat account, then you can book profit by selling it at a higher price.
1.4 Cover Order
- A cover order is an order where you place a normal buy or sell order i.e. initial order with a stop-loss in the same order form. For example, if you are placing a buy cover order you will also see an option of a sell stop order and if it is a sell cover order you will see an option of a buy stop order.
- You can put the cover order’s initial order, which is the buy or sells order, as a market order or as a limit order. The initial order can’t be a stop-loss order.
Example:
Buy Order:
The trigger price of the sell stop order should be less than the buying price of the initial order’s shares.
You placed a buy cover order where you bought the shares at the market price of Rs.200 and to reduce the risk in case the stock price goes down, you put a sell stop order with the trigger price of Rs.195. So, in case the market goes down and the price reaches Rs.195, your initially bought shares would be automatically sold out
Sell Order:
The intention behind placing a sell cover order is that you want to sell the shares of the company but you want that if the price of the stock rises to a particular price (obviously, above the selling price of your initial order), it should be bought by the system for you as it could rise above that level too and you could book a profit.
The trigger price of the buy-stop order should be higher than the selling price of the initial order’s shares.
You placed a sell cover order where you sold out the shares at the market price of Rs.200 and you put a buy stop order at the trigger price of Rs.205.
1.4 Bracket Order
- A bracket order is an order where you place an initial buy or sell order combined with a stop-loss and a target order.
- If the initial order is a buy order then it will be known as a “Bracketed buy order” and if the initial order is a sell order then it will be known as a “Bracketed sell order”.
- In a bracketed buy order, the other two orders, which are stop-loss order and target order, will be sell orders and in a bracketed sell order, the other two orders will be buy orders.
Example:
Bracketed buy order:
You want to buy shares of a particular company at Rs.200, so you placed a buy order for Rs.200 with the sell-stop market order where the trigger price is Rs.195 and you placed a sell limit order, which is your target order, Rs.205.
Bracketed sell order:
During short-selling, you can place a bracketed sell order i.e. your initial order during the placing of bracketed sell order will be a short-sell order.
Let’s say you think that the share price of a particular stock can go down during the trading session. So, you’ve decided to short-sell that stock.
You placed a sell order of Rs.200 and a buy-stop order of Rs.203 to stop your loss in case of the share price would rise above Rs.200 and you’ve decided to book a profit of 5 rupees so, you placed a buy limit order of Rs.195.
2. Orders based on ‘quantity’
2.1 All or None (AON) Order
AON order is an order that needs to be executed completely or not at all. Partial execution of an AON order is not possible. Either the broker should fill out the order completely or not at all.
The investor who placed the order tells the broker how to fill the order i.e. time duration.
Example:
You have placed an order to buy 500 shares for Rs 200. The rule is that all those 500 shares will either be bought for Rs 200 or will remain in the order book until it is executed or cancelled or its period is over.
2.2 Fill or Kill (FOK) Order
FOK order is the combination of an AON order and IOC order i.e. A FOK order is an order that needs to be executed completely (as partial execution isn’t allowed) and immediately.
If the FOK order with a specific quantity doesn’t get executed immediately, it will get cancelled itself.
Example:
You have placed an order to buy 500 shares for Rs 200. The rule is that all those 500 shares will either be bought immediately for Rs 200 or get cancelled.
2.3 Minimum Fill (MF) Order
It is an order that has a minimum fill condition that will only begin to trade if its first fill has the required minimum number of shares.
Example:
An order to buy 500 shares with a minimum volume of 200 shares can only trade if 200 or more shares become available.
2.4 Disclosed Quantity (DQ) Order
Generally, disclosed quantity is not an order; it is more than a feature or an option that allows you to only show a portion of the real quantity you decide to buy/sell on the stock exchange.
In normal orders, the entire order quantity is disclosed to the market. But order with a disclosed quantity allows the investor to disclose only a part of the order to the market.
Example:
You want to buy 500 shares of a stock at the current market price. If you do not want to disclose the order size to the market, you can set the disclosed quantity to 100. As soon as his 100 shares are executed, the next order will automatically be sent to the market. This process repeats until you’ve purchased 500 shares.
3. Orders based on ‘time duration’
3.1 Good for Day (GFD) Order
A GFD order stays valid till the end of the current trading session and that’s why it is also known as “Day Order”. A day order automatically gets canceled, if it doesn’t get executed during the whole trading session.
3.2 Good till Date (GTD/GTDt) Order
A GTD order stays valid till the date that you put it during the placing of the order. Either it gets executed or remains in the order book till the specified date if you do not cancel the order manually.
3.3 Good till Cancel (GTC) Order
A GTC order allows you to place an order which remains in the trading system until it gets executed, cancelled manually or the order expiry date reaches.
A Good Till Cancel (GTC) order is different from a Good till Date (GTD) order in a way that while placing a GTD order, you put the date till your order should get executed but there is no such option in a GTC order. What you get here is that the broker has a specific time frame until which GTC orders can be kept open.
A GTC order is kept open for a longer time than a GTD order.
3.4 Immediate or Cancel (IOC) Order
IOC order once placed will be executed immediately and if it is not executed it will get cancelled.
3.5 Aftermarket Order (AMO)
An AMO is an order that you place during the after-market hours i.e. these orders have to be placed post the market hours (after 4:00 PM) but before the pre-market opening session (before 9:00 AM) on the next day.
It is usually placed by people who don’t have access to the markets during normal trading hours.
Conclusion
You must know these different types of orders in the share market so that you can benefit from the different features available to you. Choosing the right order type while trading can help you maximise your profits in the stock market.
Knowing different types of orders is very useful not only while trading in equities but also while trading in other segments like currency and commodities.
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