Types of Stock Trading orders: GTC, Market Order, Day Order, Limit Order
What are the different types of stock trading orders?
Market order, limit order, all-or-none order, day order, and good till canceled order. These are some of the various types of trades available to a trader depending on requirements and objectives. We briefly explain all of them below.
1. Market Order
The simplest and most common type, a Market Order is a stock trading order to buy or sell immediately at the best available price. A trade executed at Market Order is consummated at the current market price.
Take note that it is possible that a price difference will exist between the time the trade is entered and the time the order is actually executed. For example, you called your live broker to purchase for you 1,000 shares of Philex Mining Corporation (Stock Code: PX). At that time of your call, PX may be trading at P11.00. But when the broker actually executes the market order, the price of PX could have been P11.50. You order will then be processed and executed at P11.50.
2. Limit Order
Compared to a Market Order, a Limit Order sets the maximum or minimum price at which you are willing to buy or sell a stock.
Assume that the stock price of Bank of the Philippine Islands (Stock Code: BPI) is P55.00. You want to purchase shares but do not want to pay more than P53.00 per share. Thus, you place a limit order to execute at, say, P52.50. BPI may trade at any price above P52.50, but your order will not be executed. The moment the price hits P52.50, your order will now be matched.
Take note that a Limit Order has risks because if BPI’s price falls from P55.00 to P52.50, your order will be executed. The risk is that if the price continues to decline, you automatically incur paper losses because your limit order was executed at a higher price. For example, if your limit order was executed at P52.50 but the stock further declined to P50.00, you are already sitting with a P2.50-per-share paper loss.
3. All-or-None Order
If you want to minimize transaction fees or ensure that all stocks are bought at a single price, you may want to place an All-or-None Order.
This type of order basically allows you to get either the entire quantity of stock you requested or none at all. It instructs your broker not to execute the trade unless it will be done in a single transaction.
4. Day Order
From its name, a Day Order is a stock trading order valid for that day. If a Day Order is not executed during the day, the order expires and will not be valid anymore during the next trading day.
5. Good Till Canceled (GTC) Order
As opposed to a Day Order that expires if not executed within the day, a Good Till Canceled (GTC) order remains open in succeeding trading days until it is finally executed or canceled.
In the Philippines, GTC orders automatically expire after they fail to be executed within seven trading days. In the United States, GTC orders remain open until 60 calendar days have passed. Be cautious when using GTC orders because you might forget about your open orders and will just be surprised that your order was processed.
Must read these other awesome, educational posts!
- FREE Stock Trading Guide and Tutorial for Filipinos
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- Stock Discussion of all PSE Listed Firms
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