When you are about to place a buy order, there are multiple types of stock orders that appear on your trading screen. Some of these orders execute immediately, while some execute at a particular price and time or some have exceptional conditions attached in it.
At a certain point in time, every trader wonders, “Which type of order would make a big difference in the price you pay and the returns you earn?”
Today in this article let us understand,
- What is a Stock order in the Share Market?
- Types of Stock orders with simple examples.
What is a Stock Order in the Share Market?
A Stock Order is simply the instruction given by the trader to buy or sell stocks from their trading platform. While placing an order, you might find the various different types of orders available on your trading screen similar to the image below.
To trade like an expert in the Stock Market, it is very essential for you to understand these types of market orders and implement it efficiently during your trades to earn great profits.
Let us now explore the various types of market orders.
Types of Stock Market Orders
1. Market Order
A market order buys or sells at the current market price of the share.
Here, the trader or investor does not have the control on the price but there is a very high probability that the trade will get executed immediately.
- If you place a “Buy order” the shares will be purchased at the current highest ask price in the trade book.
- If you place a “Sell order” the shares will be sold at the current lowest bid price in the trade book.
You want to buy 1000 shares of ABC Ltd. at market price Rs. 100
Considering the market dept of a share, it will match this trade with the highest ask price available.
If the ask price is Rs. 100 for 500 shares and 99 shares for 500, the trade will be executed at Rs. 100 for 500 shares and then Rs. 99 shares at Rs. 500.
2. Limit Order
A limit order is where the trader can set a predetermined price to buy or sell a share.
These types of orders are useful for traders who are not actively following the price movement and have a predetermined price in mind. The execution of the trade is uncertain, it will be executed when the shares reach the set price.
If you place a trade to buy/sell a share at Rs.100, it will be executed when the market price of the share reaches Rs. 100.
3. Stop Loss Order
A stop loss is where a trader can limit his losses by exiting the trade if the share reaches the trigger price.
By placing a stop loss, you can save yourself from heavy losses if the price of a share rises or falls suddenly.
Types of Stop Loss Orders
1. Stop loss Market Order
Stop Loss Market Order A “Stop loss market order” is similar to stop loss where the trader sets a trigger price to exit the trade at the best available price
Here, as soon as the trigger price is about to reach, a market order is generated and executed at the market rate immediately.
Suppose there is a sell position at Rs. 100 and trigger price for stop loss is placed at Rs.95. If the stop loss is triggered, the shares will be bought at the best available price in the market.
[Suggested Reading: What is a stop loss market order or SL-M order?]
2. Stop Loss Limit Order
This is a trade where the order is sent to the exchange after the trigger is hit is a “stop loss limit order”, i.e. the trade price needs to be defined by the user previously.
Suppose there is a sell position at Rs. 100 and trigger price for stop loss is placed at Rs.95. If the stop loss is triggered the order will be sent to the exchange and later the trade would be executed at the set price Rs. 95.
[Suggested Reading: What is a stop loss limit order or SL-L order?]
What is the Difference Between a “Limit Stop Loss” and a “Market Stop Loss”?
- In the market stop loss, the trade is executed at the best available price after the trigger is hit.
- In a limit stop loss, the trade is executed at the set price after the trigger is hit.
4. AMO (After Market Order)
AMO’s are the trades which are placed after the market is closed.
It is very essential for traders who do not have time to actively participate in the stock market but do not want to miss an opportunity of creating wealth.
Note: AMO can also be placed at Market Price.
Suggested Reading: What is an AMO Order?
If you want to buy 500 shares of ABC Ltd. at 7 am you can simply place a trade from your trading app and the trade will be executed during the market hours if the share reaches the set price.
5. IOC (Immediate or Cancel Order)
As the name suggests, when you place an IOC trade, if the trade isn’t executed immediately as soon as it is placed on the exchange, it gets cancelled.
An IOC trade is useful for traders if you frequently place trades and are unable to monitor each trade.
If you initiate an IOC trade for Rs. 1,000 of ABC Ltd. at Rs. 100. As soon as the trade is entered, if 700 shares are available at Rs. 100 it is executed and 300 shares would be cancelled.
Suggested Reading: What is an IOC Order?
6. Cover Order (CO)
Cover order is one of the types of orders where you can enter into a position along with stop loss in the same trade.
You can select the type of stop loss according to your preference – Limit or Market stop loss.
7. Bracket Order (BO)
Bracket order is a trade where 3 orders bundled into one. Here, you can place a trade with a target price and a stop loss.
Note: All Bracket trades are Limit orders.
If you want to buy a share at Rs. 100 with a target price of Rs. 110 and a stop loss of Rs. 95 i.e. you can place it all in 1 trade with bracket order.
Watch this video to know the how to Place Bracket Order with StockNote app easily and Check Margin Requirement.
CNC stands for “Cash and Carry” where you can buy and sell delivery of shares only.
Note that CNC can be placed at both “Limit Price and Market Price”.
If you wish to buy shares and sell it after a few days, you should use the CNC as the order type.
MIS stands for Margin Intraday Square off. MIS is an intraday product and they need to be squared off during the same trading day.
Note: You can either select MIS on market or limit order. Also, you have the option to select the type of trade that can be a day order or IOC.
Knowing the different types of stock orders is very useful not only while trading in equities but also while trading in other segments like currency and commodity.
Today, when the world is digital and most traders prefer trading on their own, having such in-debt knowledge is not only going to help you trade easily but also boost your confidence level.
Now that you have understood the different types of stock orders, you can start by placing your first trade in the market!