An order is an instruction to buy or sell a specific quantity of shares in the stock market.
An order is complete only if it correctly indicates the name of the listed company, whether to buy or sell and the number of shares. It has to be clearly communicated and confirmed by the broker to be valid
Types of order
1) Market Order:- It is an order where the buyer/seller is ready to execute their trade at the current market price without bargaining.
2) Limit Order:- Investor bargains and does not offer to buy or sell at the current market price.
Suppose the LTP of TCS is at Rs. 2050 and I want to buy at Rs. 2040 (i.e I am bargaining here) this is call limit order.
The order won’t get executed immediately and I have to wait till the price drops and same procedure for selling but the limit will be on the higher side say 2060.
3) Stop Loss Order:- It is an order placed by a buyer at a price lower than his buying price.
Suppose I bought 100 shares of Rs. 200 and my maximum loss potential is Rs. 500 i.e (Rs. 5 per share) and I fixed my stop loss at Rs. 195. The moment it hit the limit i.e Rs. 195, my position will be squared off (means the opposite what I have done if buy then sell and if sell then buy).
Note – If the price has hit to my stop loss limit but there is no buyer in the market then the loss will go on increasing and my stop loss will not get executed.
The biggest advantage of stop loss is that the losses will be limited.
4) Immediate or Cancel (IOC):- It is an order where the trader wants to immediately execute his buy/sell order. If it not gets executed immediately then the order gets cancelled.
Note – When you are in a very hurry then always go for IOC.
5) After Market Order:- Orders which are placed between 4:00 p.m. to 9:00 a.m. in the morning is called as AMO.
We can place an AMO’s at any time after the market hours but they will get executed at 9.15 a.m. the next day in the morning when the market opens.
6) Good Till Day (GTD):- If an investor places a limit price order @ Rs. 190, where LTP is @ Rs. 195, the order will stay in the order book.
If it gets executed it will start appearing in the trade book.
If a GTD order is placed and the order remains unexecuted till the day end, then it will automatically get cancelled.
7) Good Till Cancel (GTC):- Unless and until I cancel the order, it will remain in the system. This type of order is called GTC.
Note – Most of the brokers don’t provide GTC, instead they give GTD facility.