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Stock Order Types

Using the services on online brokers includes familiarization with the different types of orders that are in use for the execution of the various trades by investors.

Different buy and sell orders are available for the facilitation of gaining more control over stock transactions.

The different orders have different restrictions. For instance, some of them restrict transactions by price, whereas others restrict them by time.

Some of the stock orders include:

  • Market Order

    Under a market order the broker is required to sell or purchase a particular stock immediately no matter what the prevailing price is. This is the quickest and least expensive way in which you can complete your order.

    Volatile markets may deprive you of the possibility of getting a price close to the one that is listed last. Additionally, you are not guaranteed that you will get the last price listed if you are following the market.

  • Stop Loss Order

    Stop loss order states a price level which if reached turns the order into a market order. As a result the broker is required to sell the stock. The price set at the stop order is below the current market level. Stop loss orders protect their holders from losses incurred from big drop in a stock.

    In case the price of the stock rises, the stop loss order becomes useless, since no actions are taken.

  • Trailing Stop Order

    As compared to the stop loss order, the trailing stop order protects your profit. In the previous order a protection against loss was provided.  

    Trailing stops can be used to follow up the profit you have in a particular stock. The trailing stop order is entered as a percentage of the market price. A transformation into a market order is done in case the market price falls by the percentage stated in the trailing stop order. As a result the broker is required to sell the stock.

    In the case of rising stock prices, the trailing stop order follows it. This is so since it represents a percentage of the market price. A protection to the further gains is provided.

  • Limit Order

    Under a limit order the broker is required to sell or buy a particular stock at a pre-specified price. Once the desired price is reached, the order is completed. Otherwise, the order is not filled.

    Limit orders are helpful since they provide investors with an entry and exit point through the setting of the price.

    On the other hand, limit orders may represent a more expensive way of executing an order than by a market order. This is not always the case, but you should check with your broker in order to avoid unnecessary expenses.

  • Good Till Canceled (GTC) Order

    Under a good till canceled order the broker is required to keep the order active until the investor cancels it. As it can be seen, this order is used in a combination with other orders. What good till canceled order does is putting a time frame for the order with which it is in combination.

  • Day Order

    Under a day order you should understand every order different form a GTC order. So, if your broker doesn't complete your order at the same day, the next day you should re-enter the order.

  • All or None Orders

    Under all or none order the broker is required to complete the entire order or none of it. This type of order is used for thinly traded stocks.

Some brokers use different names for these orders. However, their functions are all the same no matter their name. Market orders, stop loss orders and trailing stop orders represent the orders with which you should be most familiar with.

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