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Be careful how you order

Published on:

07/04/2020

When you want to buy or sell stock market assets, you must submit a request to the financial market or your broker. This is called an "order". There are several types of those orders.

Here is a short overview of the most frequently used:


  • Market orders

    A market order makes it possible to buy stocks and shares immediately at the best price available on the market provided there is a counterparty for the quantity requested. If the order has not been entirely executed, the remainder will be added to the order book as a "market order" (without a price limit). It will be executed at the price of any new incoming order on the other side of the order book. The final price is not guaranteed, especially if there is a high level of trading activity in the share in question.


  • Limit orders

    With a limit order you are more sure to obtain a specific price than with a market order. It makes it possible to set a limit both when buying and selling, but of course gives no guarantee concerning the execution of the order.


  • Stop orders

    A stop order is a market price order that only will be executed once the specified stop price has been reached during a session.

    As soon as that happens, your order will be transformed into a market order. There is a high probability of execution, but you have no guarantee on price. These orders are valid both when selling and buying.

    It is important to bear in mind that the order will be executed at the market price and will not be limited in any way.


  • Stop limit orders

    A stop limit order is similar to an ordinary stop order in the way it is triggered. The difference is in its execution: while a stop order is launched as an order "at market price", the stop-limit order is launched as a limit order. The limit of the latter was determined when the order was placed.

    By using this type of order you can avoid surprises in very nervous or turbulent markets.


Do you want more information about the different types of orders, be sure to have a look at our trading pages.


This article does not contain any investment advice or recommendation, nor a financial analysis. Nothing in this article may be construed as information with a contractual value of any sort whatsoever. This article is intended for information only and does not constitute in any way a commercialization of financial products. Keytrade Bank cannot be held liable for any decision made based on the information contained in this article, nor for its use by third parties. Every investment entails risks such as a possible loss of capital. Before investing in financial instruments, please inform yourself properly and read carefully the document "Overview of the principal characteristics and risks of financial instruments" that you can find in the Document centre.

 

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