When trading stocks, there are several different types of orders that you can place. These orders allow you to specify the price at which you want to buy or sell a stock, and they can help ensure that your trades go smoothly and successfully. This article will discuss the main types of stock orders, including market orders, limit orders, stop loss orders, trailing stop loss orders, and others.
A market order is an order to buy or sell a stock immediately at best available current price. When you place a market order, your broker will execute it as soon as possible using whatever means necessary – including buying from other traders on exchanges if necessary. Market orders generally incur lower transaction fees than limit orders and are ideal for investors who want to buy or sell quickly.
A limit order is an order to buy or sell a stock at a specified price or better. For example, if you place a limit order to buy 100 shares of XYZ at $20 per share, your broker will attempt to execute the trade at that price or lower. Like market orders, limit orders can also be used when trading stocks quickly is essential. Still, they will generally incur higher transaction fees than market orders because they involve more work on the broker’s part.
Stop loss orders
A stop-loss order is placed with a brokerage firm to sell a security when it reaches a specific price. This type of order is created to limit an investor’s losses on a position in a security. For example, if you buy shares of ABC at $30 per share and the price falls to $25, you can place an order to sell your stock if it drops below $25 per share with your broker. The price at which the stop-loss order will be triggered is called the stop price.
Trailing stop loss orders
A trailing stop loss order is similar to a standard stop loss order, except that it adjusts as the price of the stock changes. By using this type of order, investors can potentially limit their losses while still allowing their winning investments to ride longer and maximise their gains. A trailing stop loss is set above or below the current market price of a stock. So, for example, if you buy XYZ at $30 per share and set a trailing stop loss order 10% above the current price ($33), your order will be triggered once the stock rises to $33 or higher.
Good ’til cancelled orders
Good ’til cancelled (GTC) orders are a type of limit order that remain active until they are either executed or cancelled. With GTC orders, investors can place a limit on when their trade will be executed and ensure that it does not expire before it is completed. GTC orders generally work best with less actively-traded stocks, as these may have large bid-ask spreads, which could increase transaction costs with other types of orders.
An iceberg order is a limit order that allows investors to purchase more shares than are available at the current market price. With this type of order, only a tiny portion of the total number of shares requested will be displayed for sale when the trade is executed, with the rest “hidden” from view until later. It can prevent investors from moving the market with large trades and potentially paying higher transaction fees. These orders are typically used by institutional investors and prominent players who wish to buy or sell large amounts of stock without spooking other traders.
Fill or kill order
A fill or kill (FOK) order is a type of limit order that your broker must fill instantly in its totality or cancel it. These orders are ideal for traders who want to avoid having their trade executed at an unfavourable price, as they will not go unfilled if the market price shifts during execution.
FOK orders can also protect investors from a sudden drop in the stock’s price by ensuring that any shares not sold within seconds of being placed on the market will be automatically cancelled. One potential drawback of this strategy is that investors may miss out on higher prices if the stock rises after placing their order before it is executed.