In The Stock Market, there are different types of trading styles and different types of orders. As a Trader or Investor, it is very important to know various types of orders and how to use them in the live market.
So If you are new to trading, don’t worry we will discuss various types of orders in this article. So Let’s begin….
Types of orders?
These are the various types of orders that can be placed in the stock market.
There are many types of orders in the stock market but two major types of orders that every trader or investor should know are the market order and limit order.
#1 Market Orders
A Market order is the most widely used order in the stock market. With the help of a Market Order, you can buy or sell immediately at the current market price. Typically, if you are going to buy any stock, then you will pay the current market price or near the ask price.
If you are going to sell any stock, then you will pay the current market price or near the bid price.
As a Trader or Investor, you always remember one thing the last traded price is not necessarily the price at which the market order will be executed. In the volatile market, the price at which you execute the trade can be different from the last traded price. The price will remain the same only when the bid/ask price is exactly at the last traded price (LTP).
The Market orders do not guarantee a price, but market orders do guarantee the order’s immediate execution.
Market orders are most popular among investors and traders who want to buy or sell a stock or index at the current market price. The Market orders will give the guarantee to get the trade immediately or will be executed as soon as possible.
#2 Limit Order
A limit order allows an investor or trader to buy or sell any stock or index at a certain price in the future. The limit order only executes when the price reaches the pre-defined level, on the other side of the order will not be filled within the given price, the order will not be executed.
For example, if you are willing to buy a stock at 100 level, you can place a limit order for this amount. This means if the price reaches the level, the order will be executed and if the price is not reached at this level, the order will be not executed.
There are four types of limit orders:
It is an order to buy a stock or index at or below a specified price. In a buy limit order, you can place the order at or below the current market price.
It is an order to buy a stock or index at or above a specified price. In a sell limit order, you can place the order at or above the current market price.
Buy Stop Order
It is an order to buy a stock or index at a price above the current market price. A stop order, buy becomes active only after a specified price has been reached, and Buy stop orders are placed above the market.
Sell Stop Order
It is an order to sell a stock or index at a price below the current market price. The same as a buy stop order, a stop order to sell becomes active only when a specified price level has been reached.
#3 Immediate or Cancel (IOC)
Immediate or Cancel (IOC) means an order executed instantly or canceled. If A Trader in the stock market makes a purchase of shares with the help of an IOC order this means the trader wants to order executed by a limited price instantly or canceled the order.
In IOC Order is a very short time span, often just a few seconds or maybe less, be filled the order and the rest of the order canceled. If no shares are traded in that “immediate” interval, then the order is canceled completely.
#4 Good ‘Til Canceled (GTC)
The first time GTC order was introduced by Zerodha. You can put a GTC order in your invested position so you can protect your investment with help of GTC Order.
GTC is just like Stop like Order but the difference is you can keep an order open maximum of 365 days for such orders.
#5 Cover order
A cover order is a combination of a market order and a stop-loss order. This means, your buy or sells order is always a market order.
In addition, In Cover Order, you can specify a Stop-Loss Trigger Price (STLP) and the limit price. This is the way you can reduce your risk exposure in the stock market.
Some time ago, The broker provided you the additional margin in cover order but after the Sebi Peak Margin rules, the margin remained the same as other orders.
Through a cover order, you can get the advantage of a stop loss order and target order simultaneously for lowering your risk and ensuring that your losses are limited.
#6 Bracket Order (BO)
The Bracket Order is a combination of multiple orders placed simultaneously allowing you to fully automate a particular buy or sale in each stock.
In bracket Order, you can place 3 orders at a time, which allows you to place a buy or sell order, target order and as well as stop loss order.
Bracket Order allows you to both automatically book profits as well as automatically cover losses.
The only drawback of this order is you can use it for only a single day and may not be accessible for a longer time.
#7 Margin Intraday Square Off Order (MIS):
As the name suggests, this is an intraday trading order. This means each order needs to be squared off before the market closes. MIS order gives you the advantage of benefitting from the market fluctuations or volatility during the day. And in case you don’t close your trade before 3:15 PM, the trade gets automatically squared off or closed by your broker which is called auto-square off.
Since each trade is squared off within a day, you are allowed to get greater leverage for trading. In Investing you have to pay a full amount of stock to the broker but in intraday trading, you pay a fraction of the amount you’re trading, and your broker pays the rest of the amount of your trade.
#8 Cash and Carry (CNC):
Cash and Carry (CNC) is used for delivery-based trading of equity. Using CNC order, you will not get any leverage, nor will your position be auto squared off. In a CNC order, You will not be able to sell stock without holding the stock in your DEMAT account.
Note: CNC is just a product code. If you use a CNC order to buy and sell a stock on the same day, it will still be considered an intraday order.
#9 Normal (NRML):
Normal Order is used for overnight trading in futures and options. If the trader does not want any excess leverage, he can use the order type NRML, and he would not have to worry about auto square-offs. NRML order is also used for Delivery based trading of Currency.
There are various types of orders in the stock market, but you should use them according to your trading style and your risk appetite.
I hope you all understand the different types of orders in the stock market. If you have any questions regarding this article, you can comment below this post.