Technological advancement makes it easy for everyone to trade in the stock market. But it is only some people's expertise. One should know about stock trading orders and how to trade stocks for successful trading. In the article, you will come across the different stock trading orders and how they benefit you

Stock trading proves to be a remunerative option for those who know the basics of stock trading and how to navigate the market. Yet, for beginners, it might be staggering to understand the various ins and outs of trading. Also, it might be overwhelming to understand different stock trading orders.

To make the most of your trading, it is important for you to understand how to trade stocks, their building blocks, and different order types. Every order type has its own impact on your trading strategy and serves its unique purposes.

This write-up will teach you the basics of stock trading and different stock trading orders. It does not matter whether you are a beginner or an existing trader, it will surely help you in developing a strong foundation for your trading. So brace yourself and get ready to dive into the article and explore it to make the most of your investment goals.

What Does A Trade Order Mean?

In a trade order, the investor sends an instruction to the brokerage firm or a broker to trade on his behalf. Trading generally involves buying and selling securities. An order is known as the fundamental unit of the stock market, which you can place through a trading platform or on your phones.

However, you can also place your orders through algorithms and automated trading systems. Once you place your stock trading orders, they will come under the order execution category. There are several order categories from which the traders can choose any of their needs.

Further moving on, let's continue the article with the different stock trading orders.

Classification Of Stock Trading Orders

Mainly the stock trading orders are classified into 4 main categories. The different categories of orders are as follows:-

Market Order

A market order refers to an order of buying and selling securities at the current market rates.

As these orders are the latest price in the market, the market should execute it immediately. It is the simplest of all the other types of orders. In a market order, there is only a guarantee that the order will be executed, but what will be the execution price, no one knows.

For example, the present market price of a stock is $100, and you place a market order for that stock. In such a case, your order will be executed immediately, but at what price you will get that stock, you can not guess.

There will be a differentiation in price as the market fluctuates every second because of the persistent market volatility. A market order incurs low commissions from traditional brokers as well as online because it is the most basic type of order among other order types.

Limit Order

When an individual gives the order to sell or purchase a security at no less than or no more than the specific price, then it refers to a limit order. This means a person has the authority to buy or sell a security at the price of his choice. Where there is a guarantee of order execution in market order, there is no such guarantee in a limit order.

For example, when a trader is willing to buy a stock at the price of $40, then he can place a limit order for it. Doing so, the investor will not get that stock at a higher price of more than $40. But can have the chance of getting fewer stocks or no stocks. The same is in the case of selling. If a seller wants to sell his stocks at the price of $30 or higher, then the trade will execute only when its price hits $30 or higher.

Usually, these types of orders last for a month, week, or trading day. It allows the trader to aim for the right price instead of following the stocks' price trends. Also, it helps in automating the trades to some extent.

Stop Order

Generally, a stop order is also known as a stop-loss order. As the name specifies, it is an order type in which the trader can save himself from significant losses. A stop order refers to an order to purchase or sell a stock once it reaches its stated price. The stated price also refers to the stop price. Unless the cost of the stock reaches it is stated or stop price, it remains quiescent. And once it reaches the stop price, the stop order gets converted to a limit or market order and then gets executed.

For example, A trader can not track the stock price constantly and thus believe that if the price of the stock he holds falls below $20, he can suffer a loss. In such a case, he can use the stop order to sell his stock instantly when it falls below $20.

In the above case, remember that the market will not need to sell your order at the same $20. If the stock price continuously falls and there is no demand or supply, then they can also sell your order at a price lower than $20.

Stop Limit Order

A stop limit order inherits the features of the two, i.e., stop order and limit order. In a stop limit order, once the stock's price reaches its stop price, it becomes a limit order. And that limit order will only get executed at the specified price. The main advantage of the stop limit order is that the trader has control of the price at which he wants to execute his order.

For example, a trader owns a stock of $35 and would like to sell it if the price of that stock falls below $30. But can also sell at the price of $28 or more. In such a case, the trader can set a stop price of $30 and the limit price of $28. When the stock price falls below $30, it will become a limit order of $28.

This is the best alternative to the stop order. As in stop order, the market can sell your stock at a price lower than your stop price in some circumstances. But in a stop-limit order, the market can not sell your stock below the limit price of the stock.

Other than the above stock trading orders, there are several other special instructions and restrictions that different brokerages offer on their orders like:-

All-or-none, on close, open, good-til-canceled, fill-or-kill, day, immediate-or-cancel, etc.

Conclusion

For every trader, it is necessary to know how to trade stocks. And the different types of stock trading orders along with the benefits they come with. With this, traders and investors will be able to deal in the stocks in an enhanced way. Additionally, they can maximize their profits. Also, it will help them to minimize the losses and achieve their target price of dealing in the stocks.