The Different Types of Trade Orders


The timeless yet fundamental adage when it comes to investing is “Buy low and sell high”. However, the mechanics of buying and selling are more intricate than a novice can imagine, due to a variety of options present for buying and selling.

One option available is a market order.  A market order is a condition that tells the broker to buy or sell shares at the best price available by comparing an available trade to past trades and choosing the best option. A variation of a market order is a limit order where another condition is imposed such that the buyer will not purchase any shares unless all shares are offered at the best price available. This is known as a limit order with an all or nothing condition.

A stop order establishes a threshold such that a trade is only executed if a security reaches a specified price, known as a stop price. This type of order is used when a profit is guaranteed, but the disadvantage is that such a market condition may not exist and the order may never be fulfilled.

There are also other types of orders that are more time sensitive. An immediate-or-cancel order cancels the order if the order isn’t executed right away. The opposite of this is a good-till-cancelled order, where the order exists until it has been fulfilled.

A final type of order is short selling, where one can borrow shares and sell them, with the expectation that they can buy it back in the future at a lower price.


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