Stock Market Order Types

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There are three primary order types in the share market are market, limit, and stop. Let’s discuss their differences as well as when to use each order type. The Cover Order, Bracket Order, and Good-till Canceled Order are other advanced order types.

It is helpful to see each form of order as a unique tool, appropriate for a certain task. It is crucial to choose your main goal while buying or selling, be it managing the price of your trade or getting your order completed fast at the market price. After that, you may decide which sequence is best to accomplish your objective.

Order Type in Share Market

1. Market Order

An order to buy or sell shares right away at the current rate on the market is known as a market order. It does not guarantee a specific price; rather, it just ensures that the deal will be completed (depending on the availability of buyers and sellers).

In most cases, a market order is filled at or close to the market price, whether it is a buy order or a sell order. The best available price is used for execution, not always the price of the most recent deal. Market orders come in handy if you need to enter or exit a deal fast. For example, when a stock's price is too volatile.

For example, a market order can be placed by an investor to purchase 8000 shares of XYZ stock. The order will be fulfilled right away at the best price on the market. It should be noted that the investor can wind up paying Rs 100 for 3000 shares, Rs 102 for 500 shares, and Rs 103 for the remaining 1500 shares.

2. Limit Order

With a limit order, a trader indicates the precise price at which he is ready to purchase or sell shares. Orders will only be performed at the specified limit price or above. There is no assurance that a limit order will be executed.

An order to purchase stocks at the designated limit price or less is known as a buy-limit order. An order to sell equities at the designated limit price or above is known as a sell limit order.

An investor can put a limit order for the maximum amount, say, Rs 3000, if he wishes to buy shares of XYZ stock. Only when the price of XYZ stock hits Rs 3000 or less will the order be executed.

3. Stop Loss Order (SL Order)

A stop-loss order is an order to purchase or sell stocks when the price reaches a designated trigger price, also known as the stop price. The goal is to reduce losses caused by stock price swings. If the stock price hits the designated stop-loss price, an investor can quit the deal. Buy stop-loss orders are set above the current rate, while sales stop-loss orders are set below the market price. 

For example, an investor may set a sell-stop-loss order at Rs 450, aiming to turn a profit of Rs 50 if the stock price declines. The order is activated when the price reaches Rs 450, limiting the investor's loss to Rs 50 and selling the shares for Rs 450. This example illustrates how a trader can set one stop-loss order with an upper price of Rs. 550 and a lower price of Rs. 450, but generates two linked trade orders internally.

4. After-Market Order

An order placed after market hours, on a day when markets are closed, is known as an after-market order. India's stock exchanges are open for business from 9:15 a.m. to 3:30 p.m.

If you are an investor who wants to trade but is busy during market hours, an After after-market order might be quite helpful. Not every stock broker provides its customers with the After Market Order option. The brokers offering this service clearly state what times After Market Orders are accepted.

5. Cover Order (CO)

An advance order used in intraday trading to lower the danger of an infinite loss is called a cover order. Two separate orders are placed at the same time in a cover order. It comprises a market order inside a given range and an obligatory stop-loss order. The stop-loss order is set after the market order is completed. This stop-loss order cannot be revoked by an investor. The transaction closes the intraday position and immediately cancels the stop-loss order.

An investor can put in a cover order to purchase XYZ stock at Rs 500 with a stop-loss order set for Rs 450 if the stock is trading at Rs 500. The investor can make a profit and close the deal if the price of XYZ's shares climbs to Rs 550. The stop-loss order would be activated if the share price drops to less than Rs 450. At Rs 450, the shares will be immediately sold.

6. Good till Cancelled (GTC) Order

Using a General Transactions (GTC) order, a trader can purchase or sell stocks that are open until they are filled or cancelled. It may be customised by the merchant and is usually good for a year. GTC orders can be set to expire on a certain date and are only available through a select few stock brokers. 

An investor can issue a GTC order for Rs 1100, for example, if they wish to purchase shares of XYZ stock at Rs 1000. The order will stay active until it is completed. Before execution, the order may be cancelled at any moment. 

7. Immediate or Cancelled Order (IOC) 

An order placed by a trader with the option to "cancel" or "execute immediately" is either cancelled or executed right away. Time is critical in an IOC order. For traders who don't have time to keep an eye on the markets, it is quite helpful.

An IOC order can be placed as a market or limit order. An IOC order may occasionally be partially fulfilled.

An investor may, for example, place an IOC order to buy 5000 shares of XYZ stock. The buy order for 3500 shares is completed and the buy order for 1500 shares is cancelled if there are only 3500 shares available for purchase at that time on the market.

8. Order for Trailing Stop Loss

A stop-loss order and a trailing stop-loss order are comparable, but the stop price is dynamic. If the stock price advances in your favour, the stop-loss price tracks the movement of the stock price in the market. It gives the investor the ability to control his loss without limiting his potential gain. An investor must specify both a stop price and a following stop price when putting in a trailing stop-loss order.

For example, an investor paid Rs 1000 for shares of XYZ stock. With a trailing stop-loss of Rs 5, the investor may place a sell stop-loss order at Rs 950. 

9. Bracket Order (BO)

A complex trading technique called a bracket order automates several trading steps into a single order, which simplifies the trading process. The first Buy/Sell Order, the Target Order, and the Stop-Loss Order are the three separate orders in this method. The system automatically sets the appropriate Target and Stop-Loss orders in response to an investor's Buy/Sell order.

Let's take XYZ stock, which is trading at Rs 100, as an example. An investor may put in a bracket order to buy it at Rs 100, with a stop-loss order set at Rs 95 and a predetermined target order to sell it at Rs 105. The algorithm automatically initiates the Stop-Loss Order at Rs 95 to prevent further losses and the Target Order to sell at the designated profit level of Rs 105 after executing the initial Buy/Sell order. 

 

Difference Between Market Order and Limit Order 

Here are the major differences between the market order and limit order listed in the below table: 
 

AspectMarket OrderLimit Order
Order ExecutionFulfilled immediately at current market priceExecuted at specified or better price
Quantity & Price RequiredOnly quantity requiredQuantity and price required
Influence on PriceMinimal influenceGreater influence
Risk of Price FluctuationsAssumes risk of price fluctuationsControlled risk
Execution GuaranteeLikely to be filled in fullNot guaranteed to be executed
Price at ExecutionCurrent market priceSpecified price
PrioritizationEmphasizes prompt fulfilmentEmphasizes specific price achievement

Conclusion 
Trade executions can be impacted by several circumstances. Traders can set additional restrictions that impact an order's time in effect, volume, or price limits in addition to employing other order types. Learn about the several methods you may manage your order before you place your transaction. Doing this will increase your chances of getting the desired result.

FAQs on Stock Market Order Types

Generally, market orders cannot be cancelled once placed, as they execute immediately at the prevailing market price.

Trailing stop orders are useful for securing profits by adjusting the stop price as the stock's value fluctuates, protecting against potential losses.

A buy stop order triggers a market order when the stock hits a specific price, while a buy limit order is executed at or below a set price.

Yes, with extended-hours trading, some brokerages allow placing certain order types beyond regular market hours, but execution may vary.

Order types influence timing, price, and execution certainty, shaping strategies to capitalize on market movements or protect against losses.

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