When trading in the share market, understanding the various types of orders is essential to execute trades effectively. Different order types allow you to control the price at which you buy or sell shares and provide flexibility in managing your trading strategy. Here are the main types of share market orders:
Market Order:
A market order is the most basic type of order. It instructs your broker to buy or sell shares at the current market price. The execution of a market order is generally swift, ensuring immediate trade execution. However, the actual price at which the order is filled may differ slightly from the displayed price due to price fluctuations and order matching.
Limit Order:
A limit order allows you to set a specific price at which you want to buy or sell shares. When buying, you set the maximum price you’re willing to pay, while when selling, you set the minimum price you’re willing to accept. The order will only be executed if the market price reaches or surpasses your specified limit price. Limit orders provide more control over the execution price, but there’s a chance the order may not be filled if the market doesn’t reach your trading limit price.
Stop Order:
A stop order, also known as a stop-loss order or stop-buy order, is designed to limit potential losses or trigger a trade when a certain price level is reached. A stop-loss order is placed below the current market price and is triggered when the market price falls to or below the specified stop price. This protects you from further losses by automatically selling the shares. Conversely, a stop-buy order is placed above the current market price and is triggered when the market price rises to or above the specified stop price, allowing you to buy shares at a predetermined level with trading.
Stop-Limit Order:
A stop-limit order combines features of both stop and limit orders. It consists of two prices: the stop price and the limit price. When the market price reaches or surpasses the stop price, the order becomes a limit order, which will be executed at the specified limit price or better. This type of order provides more control over the execution price compared to a regular stop order but may not be immediately filled if the market doesn’t reach the limit price with trading.
Trailing Stop Order:
A trailing stop order is a dynamic order that adjusts the stop price based on the movement of the market price. When buying, the stop price trails the highest market price by a specified trailing amount or percentage. When selling, the stop price trails the lowest market price. The trailing stop order helps protect profits by allowing for potential upside while limiting downside risk with trading thing.
Immediate or Cancel Order:
An immediate or cancel (IOC) order is a type of order that must be filled immediately or canceled. If the order cannot be executed in its entirety immediately, any unfilled portion is canceled. IOC orders are useful when you want to ensure immediate execution and are willing to accept partial fills if the entire order cannot be matched.