Types of Orders
Some basic types of orders placed by market participants are:
Market orders: The simplest type of placing an order. A trading order for buying and selling a security at the best price at the current price level. It means once the buy and sell orders are entered, the trade gets executed immediately. A buy order is executed at the Ask price whereas a Sell order is executed at the Bid price in a market order.
Limit orders: A limit order allows us to set a particular price we want to buy or sell a security. Unlike market order, a limit order offers control over buying and selling a stock at the desired price.
Stop-loss order: This is very helpful for every trader and investor because it limits the losses by exiting the trade if a particular price level is reached. If any trade goes against the anticipated view, stop loss order helps in exiting the position.
For example, a trader places a buy order:
Buy Price- ₹1075.5
Stop loss - ₹1065.5
If price falls below ₹1065, the stop-loss sell order will be executed. When the trigger price is breached, the stop loss order goes into the system order book as a normal limit order and is executed. As a result, the trader will book a loss of ₹25 per share and exit the trade.
After Market Orders (AMO): It is suitable for investors/ traders preoccupied during the day & does not have time to actively track the security price. A regular market hour in India is 9.15 AM to 3.30 PM. If an order is placed beyond these timings is classified as an After-market order. Different brokers specify a particular time interval within which one can place an after-market order.
Bracket Order (BO): These are special types of trading orders placed during intraday trading only. They combine a buy or sell order with a stop-loss and target order. These orders help stock market traders to square off their profitable position by the end of the trading session or exit from a loss-making position. However, this result is entirely dependent on the selection of stock, how the trader picks the stop-loss and target levels.
A bracket order consists of three separate orders bundled into one.
- A limit buy/ sell order
- A limit sell/buy order (to book profits )
- A stop-loss order.
Eg: If the share of ABC is trading at ₹1000. We can put a bracket order to buy it at ₹1000 with a target of 10 points and a stop loss of 5 points.For every bracket order that gets executed, we have 2 corresponding orders that get placed automatically. One is the target order and another is the stop-loss order.
Cover Order (CO): In a Cover Order, an investor can take an intraday position while he/she is protected by a stop loss order, allowing them to take advantage of additional exposure. Cover order is one of the types of orders by which one can enter a position along with a stop-loss in the same order form.
Also, based on time duration there are different types of orders:
- Good For Day Order (GFD) – order will stay valid till the end of the current trading session.
- Good Till Day Order (GTD) – We can keep our order active for a few days. Eg- If we place an order on 1st March and it does not get executed, we can carry forward to say till 4th march. If it doesn’t get executed even on 4th march, the order will be cancelled.
- Immediate or Cancel Order (IOC) – These orders once placed will be executed immediately if it is not executed it will cancel itself. In this case, it may so happen that the order will be partially executed. Eg- If we place an order to buy 1000 shares and only 600 shares get immediately purchased, the rest of 400 shares will get cancelled.
