When buying and selling stocks there are a number of different types of orders that one can enter with a broker or exchange. Each order has different ramifications as to how it is executed and at what price.
• Market orders – are executed immediately at the market price.
• Limit orders – set a limit on the amount paid or received for the securities.
• Stop orders – become market orders if the stock reaches the stop price (or the trigger price if the order is a stop limit).
• Stop limit orders – are entered as stop orders and changed to limit orders if the stock hits the trigger price.
• Day orders – expire if not filled by the end of the day.
• Good-till-canceled orders – do not expire until filled or canceled.
• At-the-opening and market-on-close orders – are executed at the opening of trading the day after the order is placed or as close as possible to the close of trading on the day the order is placed.
• Not-held orders – give the broker discretion on price and time of execution.
• Reducing orders – automatically drop in prices under certain conditions.
• Fill-or-kill orders – must be executed immediately in full or be canceled.
• Immediate-or-cancel orders – must be executed immediately in full or in part; any part of the order that remains unfilled will be canceled.
• All-or-none orders – must be executed in full, but not immediately.
• Contingent orders (either/or orders) – cannot be executed until another specified order has been executed.
All of the above orders can be used when buying individual stocks on the New York Stock Exchange. The most frequently used orders are market orders, followed by limit and stop orders. However, over the past fifteen years, at-the-opening and market-on-close orders have become more used as by option and day traders.
Quote of the Week: “Judgment comes from experience and great judgment comes from bad experience.”—Bob Packwood (former U.S. Senator)
Bart Ward is the chief executive officer of Ward & Co. Ltd., an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.