Types of Orders in Trading
Buying or selling in stock market to done by placing a stock order. Stock Market Order refers to the instruction to buy or sell shares of stocks. There is various type of orders in trading, each type of order has their own significance. Let’s learn about the types of stock market orders.
Types of Stock Market Orders
1. Market Order
This order is placed at Current Market Price (CMP). It means whenever you buy or sell shares in market orders your order gets executed instantly irrespective of the price. Market orders does not ensure the order execution at any specific price. In market orders, volatility of share price may affect the price you pay for the shares.
2. Limit Order
In limit order, you can buy or sell the shares at any specific price. All you have to do is to add a trigger price at which you want your order to get executed and your trade will get executed once the stock reaches that price.
• Buy Limit Order: To buy any stock, limit order is placed at a price below the CMP (Current Market Price).
• Sell Limit Order: To sell or short any stock, limit order is be placed at a price above the CMP (Current Market Price).
3. Stop Loss Order
Stop Loss order is placed to reduce the losses. A Stop Loss (SL) limits the risk of traders. When you add SL in your buy or sell orders, your trade or position will get square off at that SL once the stock reaches that price. SL should be placed according to your risk-taking capacity. Stop Loss order can be place in both Market and Limit orders.
• While placing Buy orders, stop loss is placed below the CMP (In case of Market orders) or triggered price (In case of limit orders) so that your risk remains limited if the share price does not go up.
• While placing Sell orders, stop loss is placed above the CMP (In case of Market orders) or triggered price (In case of limit orders) so that your risk remains limited if the share price does go down.
4. Trailing Stop Loss Order
Trailing Stop Loss Orders is suitable for long buy or sell positions. A Stop Loss (SL) value is placed while placing an order but this SL value keep changing as the price moves to your favourable condition. It ensures that you risk remains same throughout your position.
• Buy orders: Stop loss is placed below the CMP or triggered price. If the price goes up, stop loss will algo go up maintaining the difference between CMP and stop loss sane.
• Sell orders: Stop loss is placed above the CMP or triggered price. If the price goes down, stop loss will algo go down maintaining the difference between CMP and stop loss same.