Stock Order Types

The first time an investor attempts to purchase a stock online they will be presented with a multitude of different types of orders. Below we list the basic stock order types with an explanation and a bit of advice.

What is a market order?

Market Order – A market order is an order that is to be immediately executed at the best price possible. A market order to buy means that your brokerage will purchase the lowest, which would be the best, price available at the time. When you place a market order to sell the brokerage will try to sell for the highest price available. With market orders you can at times get prices that you did not expect. Sometimes you will be quite happy with the price and at other times you can really get burned. Obtaining a price you did not expect happens more often with lower volume stocks but not always.

What is a limit order?

Limit Order – A limit order allows an investor to set the highest price they will pay when purchasing and the lowest price they will accepting when selling a stock. When you place a limit order with your brokerage you are guaranteed to obtain your price or better. However, if the stock is move away from your limit price the trade may not execute. When purchasing stock online I highly suggest that investors use limit orders. This type of order will prevent you from receiving a price that you did not expect.

What is a stop order?

Stop Order – A stop order is an order that will only become active after the price of the stock has traded through a price you designate. This type of order can be useful when attempting to reduce a loss on a trade. For example, if an investor has shares of GOOG they could place a stop order to sell if the price reaches $500 or below. Such an order is used to protect your profit or protect you from losses.

What is a Day Order?

Day Order – A day order is an order which is only valid on the day it is entered. If the order is not executed that day it will be deleted.

What is good till cancelled?

Good Till Cancelled – A good till cancelled order is an order that will stay in the system until it is either executed or you cancel it. Some brokerages will allow investors to place a time limit on a good till cancelled order. If you do place a time limit the order will be deleted when its time runs out.

What is all or none?

All or None – An all or none order stipulation means that you want the other party to buy or sell all of the shares in your order. When buying and selling stock you will often find that only a part of your order has been executed. An all or none stipulation will make sure your entire order is transacted or none of it.

What is fill or kill?

Fill or Kill – This order stipulation instructs your broker to either transact the entire trade immediately or do not execute it at all.

What is at the close?

At the Close – An at the close order instructs your brokerage to attempt to sell or buy a stock as close as possible to the closing price.

What is at the open?

At the Open – An at the open order instructs your broker to attempt to buy or sell a stock as close as possible to the opening price.