What is: Order Type

What is Order Type?

An order type in trading refers to the specific instructions given by a trader to a broker or trading platform to execute a trade on their behalf. There are various types of order types available to traders, each serving a different purpose and offering different levels of control over the trade execution process.

Market Order

A market order is a type of order where a trader instructs the broker to buy or sell a security at the current market price. This type of order guarantees execution but does not guarantee the price at which the trade will be executed.

Limit Order

A limit order is a type of order where a trader specifies a price at which they are willing to buy or sell a security. The trade will only be executed if the market price reaches the specified limit price.

Stop Order

A stop order, also known as a stop-loss order, is a type of order where a trader specifies a price at which they want to buy or sell a security. Once the market price reaches the stop price, the order is triggered and becomes a market order.

Stop-Limit Order

A stop-limit order combines features of both stop and limit orders. A trader specifies a stop price and a limit price, and the order will only be executed at the limit price or better after the stop price is reached.

Trailing Stop Order

A trailing stop order is a type of order where the stop price is set at a fixed percentage or dollar amount below the market price for a long position, or above the market price for a short position. The stop price “trails” the market price as it moves in the trader’s favor.

Fill or Kill Order

A fill or kill order is a type of order where a trader specifies that the entire order must be filled immediately at the specified price, or the order will be canceled.

All or None Order

An all or none order is a type of order where a trader specifies that the entire order must be filled in its entirety at the specified price, or none of the order will be executed.

Iceberg Order

An iceberg order is a type of order where a large order is divided into smaller, undisclosed quantities to avoid impacting the market price. As each smaller quantity is executed, another is automatically generated until the entire order is filled.

Good ‘Til Canceled Order

A good ’til canceled order is a type of order that remains active until it is either filled or canceled by the trader. These orders do not expire at the end of the trading day and must be manually canceled by the trader.