08 Different Type Of Orders In Stock Market Trading – Every Investor Should Know

With the evolution and increasing demand of digital networks and the internet worldwide, it is possible to connect to every place sitting on your couch. This has also changed the way of investing money. Buying and selling stocks from the level of your comfort has made the process easy. You just need to buy stock of your choice and hold or sell the stock as per the market demands.

To know the volatility and market better, you should know different types of orders of the stock market.

What Is An Order In Stock Market?

A kind of instruction given by investors to either buy or sell stocks on a trading or stockbroker platform, is called an order.

Now let’s discuss a few of the types of orders:

• Market Order

Buying or selling a security at a going on current market price is called a market order. After the order is placed the execution need to be done urgently. One value this order gives is that it guarantees the execution of an order. Although, the price of the execution of the order is not determined or fixed always.

Let us take for an example,

you agreed to buy a stock of price right now in the market to be Rs. 500. You placed the order to buy it. Now the order will be executed then and there. But, the price may vary from the price you fixed to earlier.

As you know, the market is volatile: the prices fluctuate at a pace equal to the heart rate. So that makes sense, the amount you agreed upon while fixing the order might change due to this volatile nature. You get the price closer to the amount and the stock is liquid while you invest.

• Limit Order

This kind of order allows you to buy the stock of security of your choice. A buy limit order is an order you buy at a particular price either it is the price or lower. A sell limit order is that you sell the stock in a security at a limit price or higher. Although, the execution of this kind of order is not promising just the way market order has.

Let us understand it with an easy example:

If you put a buying limit order to some security at a rate of Rs. 150, then you agreed to buy it at the same price or might be lower. Also, if you put a selling limit order to some security at a rate of Rs. 200, then it is fixed you will sell it at the same price or higher.

This has the advantage that you don’t have to look at the trend or volatility of the market every single second to mark the price. Though, the limit order can be set or is set for a timeline of one day, a few weeks, a month, or more. It eventually automated the amount.

• Stop-Loss Order

When you buy or sell stock when the stock prices reached a certain specific value. This value is called as “stop-loss price”. The order in such a scenario remains dormant till the price is reached. Once the price is reached now the stop order becomes either a market order or limit order and thus this way order is placed.

This order is your kind, if you don’t want to invest time to look after the trade functions that it is in losses or gains throughout the day. For example, you know you would face a loss if the stock falls below Rs. 30. But you can just put the stock in stop order and do not have to monitor it regularly. Once the stock reaches its level, you can sell the stock.

This allows to dissolve a larger amount of loss and is often termed as a “stop-loss” order.

• Cover Order 

A combination of market order and stop-loss order is called a cover order. Your bought or sold order is always termed as a market order. But with this, you have a lifeline button of the Stop-loss trigger plan(SLTP) and limit order in specific. This can reduce your risk of exposure to the market eventually.

As the cover order has a unique support system of SLTP. This kind of order has some limitations to the range depending on the security and your brokers. This ensures to lower your risk and making sure that your losses are limited.

• Margin Intraday Square Off Order (MIS)

As the name, this order is an Intraday kind of. Taking the name into consideration, MIS each order is squared off in a single trading day. This has one advantage as the fluctuation might be not terrible here as the trading is done within a day. If you don’t close the trading before 3:00 Pm then it automatically closes Pending Orders & MIS Positions on its own after it is squared off.

This has an advantage as the trade is squared off in a single day, the greater amount is leveraged. In investing encyclopedia, leverage is the amount of money one borrows to place a trade. You pay some fraction of the amount and the rest is paid by the broker.

• Bracket Order (BO)

The bracket order combines the market order the benefits placed simultaneously allowing you to fully automate a particular purchase or sale in a given security.

It normally at the initial stage consists of 3 legs or individual orders, that allows you to buy or sell order, its target order as well as its stop-loss order. This results in a full covered order being placed on the exchange allowing to directly book profits as well as directly cover losses.

The only drawback of the bracket order is that you get a single trading day and the time frame is quite less. The accessibility shuts automatically.

• Cash and Carry (CNC)  – Carry Forward
  

This is used for delivery-based equity. In this type of trade, you can hold on to the trade overnight for however long you want. But using CNC, you won’t get any leverage, or will position auto squared off be available. Though, you can sell the holdings using the product type.

• Margin Trading Facility (MTF)

This is the offer given by brokers to investors to buy stocks just by paying a fraction of the investment amount. The pledging of the same is done before 9 pm same day, else it will get squared off by T+7 days.

This MTF is applicable for trading in equity shares only. One can also take new positions in MTF as long as you provide enough margin.

Conclusion

To know such orders playing in the stock market is important as this plays key importance in purchasing or selling the stocks. Choosing the right type of order reflects the profit you bag further.