Telling the market what you want
An order states a side (buy or sell), a quantity, and conditions on price and time. The two basic types are the market order and the limit order. A market order executes immediately at the best prices available: execution is almost certain, but the price is not guaranteed. A limit order executes only at its limit price or better: the price is guaranteed, but execution is not.
A stop order sleeps until the market trades at its stop price, then becomes a market order (or a limit order, for a stop-limit). It is used to cut losses or enter a breakout; in a fast market the fill can be far from the stop price.
Time in force says how long an order lives. DAY expires at the close. GTC (good till cancelled) stays until cancelled, usually up to a broker limit of a few months. IOC (immediate-or-cancel) fills whatever it can right now and cancels the rest. FOK (fill-or-kill) must fill completely at once or is cancelled. Market-on-close (MOC) orders join the closing auction.
- Market: executes now at the best available prices.
- Limit: executes at the limit price or better, may rest in the book.
- Stop: becomes a market order once the stop price trades.
- IOC: fills what it can immediately and cancels the rest.
- FOK: fills completely at once or is cancelled entirely.
- MOC: a market order that joins the closing auction.
Lab · what's graded
- Order types25 pts
- Where does a limit buy fill?10 pts
- Market orders15 pts
- Average fill price15 pts
- Immediate-or-cancel15 pts
- IOC versus FOK20 pts