13 Types of Stock Orders

When it comes to individual investing, it’s important to learn about the different kinds of orders you can place through your broker. Knowing these stock orders and when they’re appropriate can help you make the most of your investment strategy. Let’s explore what stock orders are, the various types of stock orders that exist, and how they work.

  • Stock orders refer to instructions, specifications, or requirements on how to buy or sell a stock.
  • Market orders refer to an order to immediately buy or sell a security, while limit orders refer to orders where investors can buy or sell a stock at a specific price in the future.
  • Limit orders give you more control over the trading prices when you buy or sell a stock.
  • More often than not, limit orders have higher commissions than market orders.

What Are Stock Orders?

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Stock orders refer to instructions, specifications, or requirements on how to buy or sell a stock. The types of stock orders available for you to execute depending on your particular broker.

Types of Stock Orders

Different types of stock orders can help you make better trades on the stock market. When it comes to stock orders, there are two main types — market orders and limit orders. Here’s a detailed look at each:

Market Order

This type of trade refers to an order to buy or sell a security right away. Keep in mind that the price at which the security last traded at won’t always be the price when the market order is executed. Therefore, market orders don’t ensure the execution price, but rather the order’s immediate execution.

Typically, market orders go through at or around the current bid for a sell order or at or near the ask price for a buy order.

Investors who want to buy or sell a stock without having to wait tend to prefer market orders. Despite not knowing the exact price of the trade, a market order increases the probability of the trade being executed. In addition, despite the fact that you can’t specify the trade price, your broker can execute a market order rather quickly.

This type of trade is best used when you want a quick execution no matter what, you only want to trade a limited amount shares, or you’re trading an easily sold stock that features a narrow bid-ask spread.

Limit Order

Also known as a pending order, limit orders refer to orders of when investors can buy or sell a stock at a specific price in the future. This means that if the stock doesn’t reach the specified price, the order won’t be filled.

Essentially, a limit order predetermines the highest and lowest point at which you’re willing to buy or sell the stock. Let’s say you want to buy a stock at $30 and enter a limit order for the said amount. This means you aren’t willing to pay anything over $30 to buy the security, though, you could always buy it for less than $30 that you specified in the order.

Here are four types of limit orders to consider:

  • Buy limit: A buy limit refers to an order to buy a security at a certain price or below. To improve the price, you need to set the limit order at or below the stock’s current market bid. Let’s say you want to buy shares of stock at $15 or below. After you submit a buy limit order with this specified price, the order will only go through if the stock’s price is $15 or lower.
  • Sell limit: Sell limits are orders to sell a stock at the set price or above. To improve the price, the sell limit order needs to be set at or above the stock’s current market ask. For example, let’s say you want to buy stock shares for no more than $20. After you submit a sell limit order, it means the order will only be executed if the stock is $20 or higher.
  • Buy stop: A buy stop order is an order to buy a stock at a price higher than the stock’s current market bid. As opposed to buy limit orders, buy stop orders are placed above the market. Once the stop level is reached, the order moves to a market or limit order.
  • Sell stop: Sell stop orders refer to an order to sell a stock at a price that’s lower than the current market price. When the sell stop price is reached, sell stop orders act like market orders. You can use a sell stop order to get out of a long trade.

Keep in mind that with both a buy stop and sell stop, the set price level (also known as the stop level), needs to be reached for the order to become active.

Overall, limit orders give you greater control over the trading prices when you buy or sell. This means that while you’re not guaranteed the stock trade, you can name your price with a limit order.

Other Stock Orders

Outside of market and limit orders, there are other restrictions and instructions you may encounter from brokers. While not all brokerages or platforms allow these orders, they’re still worth considering. Talk with your broker if you’re unable to use an order that you’re interested in. Here are some additional types of stock orders to consider:

  • Stop-Loss Order: Also known as a stop order, a stop-loss order is inactive until the stock passes a specific price. Once it does, it becomes active as a market order. For example, if a stop-loss sell order was placed on stock shares at $40 per share, the order will remain dormant until the stock price reaches or dips below $40. It’s worth noting that a stop order ensures an order execution, though not always at the stop order price.
  • Stop-Limit Order: A stop-limit order places a limit on the price when it executes. To enter this trade, you need to set two prices: the stop price and the limit price. When the stock reaches the stop price, it converts to a limit order. As opposed to a stock order, a stop-limit order ensures a price limit.
  • Immediate or Cancel: This order allows you to buy or sell a security with immediate execution. Anything unfilled gets canceled.
  • Good-Til-Canceled: A good-til-canceled order allows you to purchase or sell a stock. It’s in effect until the order is completed or canceled.
  • Fill or Kill: This is an order to purchase or sell a stock with immediate, complete execution. If it’s not executed, the order is canceled with no possibility of partial fulfillment.
  • Trailing Stop Order: With a trailing stop order, you set a stop price somewhere below the market price, along with a ‘trailing’ amount. When the market goes up, the stop price goes up in accordance with the trailing amount.
  • Take Profit: This limit order provides you with a price at which you should close an open position in order to make a profit.
  • All-Or-None: An all-or-none order allows you to purchase or sell a stock. It needs to be executed immediately or not at all.

Market Order Costs vs. Limit Order Costs

W hen it comes to market orders and limit orders, you face additional costs. More often than not, limit orders have higher commissions than market orders.

For example, let’s say a market order costs $5 and a limit order costs you $10. The stock you’re interested in is currently trading at $50 per share, and you want it for $49.80. When you place a market order to buy 10 shares of the stock, you end up paying $500 plus a commission of $5, which brings you to $505. With a limit order for 10 shares set at $49.80, you’re charged $498 plus a limit order commission of $10, costing you $508.

While you get the stock at a cheaper price point, you end up spending more in the long run since you have the added costs of the order. It’s also worth noting that you may not have the chance to buy if the stock continues to rise above the limit order.

Now that you know what stock orders are, consider which best complement your investment strategy. Be sure to consult with your broker to determine if the stock order you want to execute is available to you.