Understanding The Different Types of Stock Market Orders

To become successful with stock market trading, you need to have knowledge of the different types of orders. As a market trader, you will be engaged in buying or selling shares depending on the market situation. Here now are the different types of trades in stock market.

Market Order

In a market order, you will buy or sell shares at the best available price. While it does not guarantee that you will get your desired price, it gives an assurance that you will get the shares that you want. Your order is filled once completed. Market order is often used to fill the size of the order and not concerned with the price.

Limit Order

When trading on the stock market, limit order specifies the price at which you want to trade. It can be all-or-none which means that there is no agreement to buy shares unless you get your desired number of shares. This type of order is used if your main concern is to get the price you want to receive and not concerned with completing the size of the order.

Stop Order

A stop order is contingent on a certain price level being achieved in order to activate the trade. The trade will only be implemented when the security you want to buy or sell in stock market trading has reached a certain price level. Upon reaching your set price level, stop orders are transformed into a market order and becomes filled. This type of order allows you to limit your losses.

A stop order is also useful in guaranteeing profits. It can be beneficial to investors who are unable to track their stocks for a certain period of time. However, one disadvantage of this type of order is that it does not guarantee the completion of the order at your preferred price. It may be lower than the price you have indicated.

Other Types of Orders

There are other types of orders used when trading on the stock market. An immediate-or-cancel (IOC) order is cancelled if the order is not filled or activated right away. It is often combined with a limit order. When used together with a market order, the IOC is called fill-or-kill (FOK).

A day order, as the name implies, is a limit or stop order that is cancelled at the conclusion of the trading day. It will no longer be active the next trading day. A good-till-cancelled (GTC) order remains active unless you instruct the order to be cancelled. It may remain active for several days.

These are the types of orders that you will be dealing with in stock market trading. You need to master when to place them in order to become successful.

Robert Janitzek provides guides and tips on how to become successful in the stock market.

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