Order Types (Back to Index)

Market Orders

Market orders are orders to buy or sell at the current price as quickly as possible. No price is specified, but the broker, or your online system, fills the order at the best available price. You pass the responsibility to the floor brokers who fill the order as best they can. Floor brokers are governed by the CFTC and exchange rules to give you the best possible service. You don’t have control over the market, however. When markets are trading choppy with a lot of volatility and low volume, you may not want to use a market order. Market orders have the highest level of priority and get filled first.

Stop Orders

Stop orders are orders that become market orders when a particular price level is reached. You place buy stops above the market if you are bullish on prices. You place sell stops below the market if you are bearish on prices.

Stop orders are often used to close out or protect profitable positions. If the market moves against you, your sell stops are hit. They become market orders and you offset your positions. Placing the stop takes some skill and experience. If you place it too close to your position, a slight move in the wrong direction and you’re prematurely out of the market. If you put it too far from your position, you can give up too much of your profit before it is hit. Take a good look at volume, volatility and daily trading ranges before you make the decision on where to place your stops.

Limit Orders

Limit orders (or price limit orders) are used to enter a market at a specified price level or better. Buy limit orders are placed below the going market price and can only be filled at or below the limit price. Sell limit orders are placed above the current market price and can only be filled on, at, or above the limit price. The market may never reach the designated price, however, so Limit Orders are not guaranteed to be filled.

Stop Limit Orders

Stop limit orders are used to trade within a certain price range. They specify two prices – a stop and a limit. The worst price an order can be filled at is the limit level, and the best price is the stop level. Stop limit orders are sometimes used to give protection in fast moving markets.

Market If Touched Orders

Market If Touched (MIT) orders are the opposite of stop orders. They are used to enter a market once a trade occurs at a specified price. Once that price is touched, the order will be filled at the next available price. In effect, they become market orders. MIT orders can be used to establish new positions or close out existing ones. Some exchanges do not allow MIT orders so you’ll need to check the exchange rules before deciding to use them.

Fill or Kill Orders

Fill or Kill (FOK) orders are time limit orders and must be filled immediately or they are cancelled. Traders use these when they spot a trading opportunity, but they do not have top priority. However, floor traders try to accommodate them.

Market on Open & Close Orders

These time limit orders allow you to place your orders in the opening or closing trading range. Market on Open must be filled within the open range, just as Market on Close must be filled within the closing trading range.

Good Till Cancelled Orders

Good Till Cancelled (GTC) orders are standing orders. Theoretically, these orders will stay in the market until filled. These are often referred to as “Open” orders. However, you risk the danger of losing track of these orders and they may be filled just when the market turns against you.

One Cancels Other Orders

One Cancels Other (OCO) orders are another type of time limit orders. OCOs let a new order replace one already in the market.