Limit Order

A stop order is an order similar to the limit order in that the trade is not to be executed unless stock hits a price limit.An order in a market such as a stock market, bond market or commodity market is an instruction from a customer to a broker to buy or sell on the exchange. These instructions can be simple or complicated. There are some standard instructions for such orders.

Market order

A market order is a buy or sell order to be executed immediately at current market prices. As long as there are willing sellers and buyers, market orders are filled. Market orders are therefore used when certainty of execution is a priority over price of execution.

A market order is the simplest of the order types. This order type does not allow any control over the price received. The order is filled at the best price available at the relevant time. In fast-moving markets, the price paid or received may be quite different from the last price quoted before the order was entered.

A market order for a large number of shares may be split across multiple participants on the other side of the transaction, resulting in different prices for some of the shares.

Limit order

A limit order is an order to buy a security at no more, or sell at no less, than a specific price. This gives the trader control over the price at which the trade is executed; however, the order may never be executed ("filled"). Limit orders are used when the trader wishes to control price rather than certainty of execution.

A buy limit order can only be executed at the limit price or lower. For example, if an investor wants to buy a stock, but doesn't want to pay more than $20 for it, the investor can place a limit order to buy the stock at $20 "or less". By entering a limit order rather than a market order, the investor will not buy the stock at a higher price, but, may not get the stock at all.

A sell limit order is analogous; it can only be executed at the limit price or higher.

Both buy and sell orders can be additionally constrained. Two of the most common additional constraints are Fill Or Kill (FOK) and All Or None (AON). FOK orders are either filled completely on the first attempt or canceled outright, while AON orders stipulate that the order must be completely filled or not filled at all (but still held on the order book for later execution).

Time in force

A day order (the most common) is a market or limit order that is in force from the time the order is submitted to the end of the days trading session. For equity markets, the closing time is defined by the exchange. For the Foreign exchange market, this is until 5pm EST/EDT for all currencies except NZD.

A good-till-cancelled order requires a specific cancelling order. It can persist indefinitely (although brokers may set some limit, for example, 90 days).

An immediate-or-cancel order (IOC) will be immediately executed or cancelled by the exchange. Unlike a fill-or-kill order, IOC orders allow for partial fills.

Most markets have single-price auctions at the beginning ("open") and the end ("close") of regular trading. An order may be specified on the close or on the open, then it is entered in an auction but has no effect otherwise. There is often some deadline, for example, orders must be in 20 minutes before the auction. They are single-price because all orders, if they transact at all, transact at the same price, the open price and the close price respectively.

Combined with price instructions, this gives market on close (MOC), market on open (MOO), limit on close (LOC), and limit on open (LOO). For example, a market-on-open order is guaranteed to get the open price, whatever that is. A buy limit-on-open order is filled if the open price is lower, not filled if the open price is higher, and may or may not be filled if the open price is the same.

Fill-or-kill orders (FOK) are usually limit orders that must be executed or cancelled immediately. Unlike IOC orders, FOK orders require the full quantity to be executed.

Regulation NMS , (Reg NMS) which applies to U.S. stock exchanges, supports two types of IOC orders, one which is Reg NMS compliant and will not be routed during an exchange sweep, and one that can be routed to other exchanges.

Conditional orders

A conditional order is any order other than a limit order which is executed only when a specific condition is satisfied.

Stop orders

A stop order (also stop loss order) is an order to buy (or sell) a security once the price of the security has climbed above (or dropped below) a specified stop price. (Note that both bid and ask prices can trigger a stop order.) When the specified stop price is reached, the stop order is entered as a market order (no limit). This means the trade will definitely be executed, but not necessarily at or near the stop price.

Once the stop price is reached, the stop order becomes a market order. In a fast-moving market, or if there is insufficient liquidity available at the stop price, the price at which the trade is executed may be much different from the stop price. The use of stop orders is much more frequent for stocks, and futures, that trade on an exchange than in the over-the-counter (OTC) market.

Charles Schwab:definition Stop orders and stop-limit orders are very similar, the primary difference being what happens once the stop price is triggered. A standard sell-stop order is triggered when the bid price is equal to or less than the stop price specified or when an execution occurs at the stop price.
Key point is "bid/ask" which are queues and do not represent the stocks value. The broker above moves the stop order to the market queue based on a BID queue not on a completed transaction. For instance, on a stock XYZ closing at $20 the day before with a stop-loss order at $19 and which trades on low volume, the bid/ask at the open can be skewed in that at the open all the market interest is not represented. The bid queue shows $18.5, the market opens, being the highest bid the broker triggers the stop-loss and moves the order to the market, for which there has not even been a trade, an agreed value. The stock trades for $20.50, never even trading at or below the stop-loss order. Brokers who use the BID queue as a trigger violate the stop-loss definition as per the SEC who define it as a trade. The impetus for the broker definition is commissions.

A sell stop order is an instruction to sell at the best available price after the price goes below the stop price. A sell stop price is always below the current market price. For example, if an investor holds a stock currently valued at $50 and is worried that the value may drop, he/she can place a sell stop order at $40. If the share price drops to $40, the broker sells the stock at the next available price. This can limit the investor's losses (if the stop price is at or below the purchase price) or lock in some of the investor's profits.

A buy stop order is typically used to limit a loss (or to protect an existing profit) on a short sale. A buy stop price is always above the current market price. For example, if an investor sells a stock short—hoping for the stock price to go down so they can return the borrowed shares at a lower price (Covering)—the investor may use a buy stop order to protect against losses if the price goes too high. It can also be used to advantage in a declining market when you want to enter a long position close to the bottom after turn-around.

A stop limit order combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or to sell) at no more (or less) than another, pre-specified limit price. As with all limit orders, a stop-limit order doesn't get filled if the security's price never reaches the specified limit price.

A trailing stop order is entered with a stop parameter that creates a moving or trailing activation price, hence the name. This parameter is entered as a percentage change or actual specific amount of rise (or fall) in the security price. Trailing stop sell orders are used to maximize and protect profit as a stock's price rises and limit losses when its price falls. Trailing stop buy orders are used to maximize profit when a stock's price is falling and limit losses when it is rising.

For example, a trader has bought stock ABC at $10.00 and immediately places a trailing stop sell order to sell ABC with a $1.00 trailing stop. This sets the stop price to $9.00. After placing the order, ABC doesn't exceed $10.00 and falls to a low of $9.01. The trailing stop order is not executed because ABC has not fallen $1.00 from $10.00. Later, the stock rises to a high of $15.00 which resets the stop price to $14.00. It then falls to $14.00 ($1.00 from its high of $15.00) and the trailing stop sell order is entered as a market order.

A trailing stop limit order is similar to a trailing stop order. Instead of selling at market price when triggered, the order becomes a limit order.

A trailing stop trailing limit order is the most flexible possible order.

Peg orders

To behave like a market maker, it is possible to use the Peg orders:

Peg best