If you want to buy or sell a stock, you will see several order types present there. Like Market order, Limit order, Day order, or Immediate or Cancel order(IOC). You may get confused by seeing them, that what are they. Today in this video, we will tell you what are the different types of order and what they exactly mean.
So that whenever you place an order, you will know what type of order you are placing and at what time. Whenever you place an order, you are asking your broker to give a particular instruction on stock exchange. And whenever the instruction gets fulfilled, your order is placed in the stock exchange.
Basically, you can place an order on two places. One, NSE, which is National Stock Exchange and the second is BSE, which is Bombay Stock Exchange. If you choose any stock and if it is listed on both, BSE and NSE, you can choose where to buy it. Now, we will talk about two major orders in the market. First is market order and the second one is limit order.
Market order means if the current price of a stock is Rs. 100 or RS. 105, then you are placing a buy order at the same price. So, that price may change. It can go down from 105 to 102 or go up to 108 as well. Here, you cannot change the price. If you are placing an order at 105, you may get that stock at 107, or at 102. Its one advantage is that the chances of your order being fulfilled is high.
But one disadvantage is that whatever the current market price is, either high or low, your stock order will be fulfilled at that price. Suppose you are placing an order for 10 stocks at RS. 200 each. If you have placed order and price of that share price fluctuates, it goes to Rs. 208 from Rs.200, in market order, your order will get executed at Rs. 208 and not at Rs. 200.
But its advantage is that the chances of your order being fulfilled will be high.
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Now, let’s talk about Limit order. Limit order means you can execute the order at your desired price. It means, if the current price of a share is Rs. 500, you can place an order to buy it at Rs. 480, or at Rs. 490. But your order will be executed only when that price will reach Rs. 490 or RS. 480. If the price doesn’t reach there, your order won’t go to the market.
Let’s assume that you want to place an order for 100 shares and current price for each share is Rs. 150. But you want to buy that share at Rs. 140. And you placed buy order for 200 shares at RS. 140. So unless the share price reaches 140, your order will not get executed in the market. But once the price reaches 140, your order will get executed. This is one of its advantages and also its disadvantage.
You can enter your desired price. But if your desired price never comes, your order will not get executed. It may reach 142 or 141 from 150, but you have placed order for 140. So unless it reaches 140, your order will not get executed. Generally, it is used in the market by traders when they know at what price they want to buy and sell the share. We just told you about market order and limit order.
Stop Order Or Stop loss Order
There is an another order type which is Stop order. Many people also call it Stop loss order. As you can understand by the name, Stop loss order means, you want to stop your loss. If you have placed a buy order at Rs. 100 and you expect it to increase further. But sometimes, the market can move against your expectations. Market may move down instead of moving up.
So, to protect your loss, you can place a stop loss order. Suppose, you placed a stop loss order at Rs. 95, means you are predicting that you are ready to take Rs. 5 loss per stock. If you have placed order at Rs.95, whenever market price reaches Rs. 95, your order gets executed. And in this case, your loss cannot be more than Rs. 5.
There are two types of stop order, stop loss market and stop loss limit.
Stop loss market means, if the current market price of a share is Rs. 100 and you have placed a stop loss order at 95. So, in stop loss market, your order will be triggered and get executed at Rs. 95. For this reason, most people prefer stop loss limit order. Here, you set your trigger price at Rs. 95. And you set your limit price just below it. If your trigger price is Rs. 95, then you set your limit price at 94.6 or 94.8.
It means, your order in the market is triggered at 95. But to execute, it should reach 94.6 or 94.8, whichever you have set. So, there is one issue with the stop order that if market falls drastically and if you have placed a stop loss order, your stop loss order may not get executed at all.
Your stop loss order is open in the market, but it may not get executed. For example, in this case, you have placed order for 95 and suddenly the price falls down to 85, 88 or 90. Your order may not get executed, your order may still remain open in the market.
Now, let’s talk about other types of orders.
The first one is Cover order. Cover order means, you can enter your buy price and stop loss at the same time. It is not like, first you place a buy order then return to place the stop loss order. The advantage of cover order is, if the current price is Rs. 100, enter your limit price there, and there itself, you get the stop loss option. For example, you entered stop loss of 95 and placed the order at the same time. Here, the advantage is, you don’t have to place two orders. You can place an order in one go.
Next is Bracket order. Bracket order means Cover order plus Target price. There are three components in a Bracket order. Your Buy price, Target price, and Stop Loss. Suppose Buy price is Rs. 100, and your Target is Rs. 110, and Stop Loss is Rs. 95. Suppose your target of 110 is hit your stop loss order will automatically get cancelled. Now, if you have bought it at Rs. 100, and it hits 95, your stop loss order will be triggered and at the same time your target order of Rs. 110 will get cancelled. Some people also call it OCO, which is One Cancels Other. This is what Bracket order is.
Basically, the difference between bracket order and cover order is the bracket order is an advancement of the cover order. Market timing is 9:15 a.m. to 3:30 p.m. But some of you may not be available at this time to place an order. Or when you come back home from work you want to do some research before placing an order. For this, you have an option of AMO, which is After Market Order. If you cannot place an order between 9:15 a.m. to 3:30 p.m you can place your order after market hours.
After market means you can place it at 4:00 p.m, you can place it at 8:00 a.m. But you have to check it with your broker because every broker has different timing. For example, if you place an order at 4:00 p.m. your order will get executed on the next market day. It will get executed at 9:00 a.m. or 9:15 a.m. depending on the broker. Your order will be executed at the price of the next day morning.
Suppose you have placed an order at 4:00 p.m. whose current price is Rs. 100 per share, and the market opens at Rs. 104 on next day morning, then your order will get executed not at Rs. 100 but at Rs. 104. Whenever you are placing an order , you can place it by two methods. First is by taking delivery and second one is intraday.
Delivery means if you are placing a buy order for a stock, and you want its delivery, which means you want all the shares in your Demat account. It is called delivery. The other is intraday. Intraday means if you are placing an order in the morning, you have to exit it before the evening. Delivery is preferred by investors and intraday is preferred by traders, that they placed an order in the morning and sold it before the market closes.
Whenever you choose intraday you don’t get delivery of the stock. You bought it in the morning and sold in the evening. Different brokers use different terms for them. At some places you will see MIS, which means intraday. Or at some places you can see CNC, which means delivery. By now, we have covered all the majority of orders. But, if you are placing an order, it also has two options. One is day order and the other is Immediate Or Cancel order, which is also called as IOC.
Immediate Or Cancel Order
You can get the meaning of Immediate Or Cancel order by its name. Either it will get executed immediately, or it will get cancelled if didn’t get executed. Suppose , you have placed an order for 100 shares and out of that, only 50 shares got executed. Then the order for remaining 50 will automatically get cancelled.
Then, second is day order. Day order means, you placed an order at 10:30 a.m. and it doesn’t get executed immediately. Your order will remain open in the market till it touches your price. Here also, you get two options. First one is Good For Day. Good For Day means your order will be valid till 3:30 p.m. If it get executed at any point till 3:30 p.m., then alright. By any chance, if your order doesn’t get executed by 3.30 p.m., then your order will get cancelled at 3:30 pm.
Good Till Day Order
Next is Good Till Day order. In good till day, suppose you placed an order on Monday at 11.00 am and you kept the validity of that order till Friday. If your order doesn’t get executed till Friday then it will get cancelled. So your order will remain open from Monday to Friday till your price arrives.
If you observe each broker, it is presented in different ways. For bracket order, you will see BO. For cover order, you will see CO. Or if you are placing a cash order, you may see CNC in some places or you may see Delivery in another. It depends on the broker where you have registered and what are the terms being used on their platform.
These were the different types of order in the stock market. But if you want to learn about stock market basics, like CAGR, or what is Trading and Demat account, or different market participants, like stock exchanges, or what are depositories, you can visit our website spfmsp.org.