Section 8.5 – Types of Orders
Market Orders
Limit Orders
Stop Orders (Stop = Trigger Order)
Stop-Limit Orders
Duration Instructions
Fill Instructions
1. Market Orders:
Most common order for retail investors.
Means “buy or sell at the market” = execute immediately at the best available price.
No price restriction.
Filled in the order received.
Executed immediately (if shares are available).
Customer doesn’t know the price until after the order fills.
Priority over other orders with price restrictions.
Normally fills near the current quote, but no guarantee.
Example:
If KPN stock is Bid $25 / Ask $25.25
→ A market sell order executes around $25 (the bid).
→ A market buy order executes around $25.25 (the ask).
2. Limit Orders:
The customer sets a specific price they are willing to buy or sell at.
Guarantees the price (or better) but not execution.
Buy limit: “Buy at this price or lower.”
Sell limit: “Sell at this price or higher.”
Processed in the order received.
If not executed, expires at end of trading day (unless marked GTC).
Example:
If you place a buy limit at $20, it executes only at $20 or less.
3. Stop Orders (Stop = Trigger Order):
Used to activate a market order once the stock reaches a specific trigger price.
When triggered, it becomes a market order (executed at next available price).
Helps investors limit losses or protect gains.
Types:
Sell Stop: Trigger below current market price.
Used to sell if the stock drops.
Once triggered, becomes a market sell order.
Buy Stop: Trigger above current market price.
Used to buy if the stock starts rising.
Once triggered, becomes a market buy order.
Example:
BCO stock trading at $12.
Order: Buy 2,000 shares stop 15.
→ Once BCO trades at $15, the order becomes a market buy order.
4. Stop-Limit Orders:
Similar to stop orders, but triggers a limit order instead of a market order.
Two prices:
Trigger price (activates the order)
Limit price (sets max or min execution price)
Once triggered, executes only if limit price is available.
Example:
Buy stop-limit at $15 stop / $15.25 limit
→ When price hits $15, order activates, but executes only at $15.25 or less.
5. Duration Instructions:
Day Order: Valid only for that trading day. If not executed, it’s canceled.
Good-’Til-Canceled (GTC): Stays active until executed or canceled manually.
6. Fill Instructions:
Fill or Kill (FOK): Entire order must fill immediately or it’s canceled.
No partial fills.
Immediate or Cancel (IOC): Must fill immediately, but partial fills allowed.
Unfilled portion is canceled.
All or None (AON): Must fill completely, but not immediately required.
Can be Day or GTC orders.
Orders
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Orders 〰️
✺ Review questions ✺
-
A) Stop order
B) Limit order
C) Market order
D) Fill or Kill order
✅ Answer: C) Market order -
A) Market order
B) Limit order
C) Stop order
D) Stop-limit order
✅ Answer: A) Market order -
A) Market order
B) Limit order
C) Stop order
✅ Answer: B) Limit order
-
A) It becomes a market order to sell.
B) It becomes a limit order to sell.
C) It executes immediately as a buy.
✅ Answer: A) It becomes a market order to sell. -
A) Filled immediately, partial fills allowed
B) Filled immediately, all or nothing
C) Filled eventually, all or none
✅ Answer: B) Filled immediately, all or nothing -
IOC allows partial execution, FOK does not.