What are order types?
If an investor places a buy or sell order for a security with his broker, he can choose between several options as to how the order is to be executed and at what price. The different order types make it possible to achieve fair prices when selling and buying shares etc. and to exclude large losses in advance. Therefore, special order types also help to implement one's own strategy in the best possible way. The most important information on order types, limit stop, loss threshold, maximum price and more is simply explained below.
Not all order types are possible at every trading venue and with every broker. Different brokers sometimes charge high costs for special order types, which is why it is important to consider this criterion in advance when choosing a broker and trading venue.
Market order
A market order is the most frequently used order type in Exness. Entering a market order means that the trader absolutely wants to execute the purchase or sale as quickly as possible. It does not matter how the price develops in the time between the order being placed and the order being executed.
The shares are bought cheapest or sold best. This does not mean, however, that the trader will get the highest price traded on the stock exchange that day when selling. Even when buying, it may happen that the same securities could be executed at a cheaper price on the same trading day. Best and cheapest only mean that orders will be executed at the next possible time and at the current price, no type of stop price can be set.
Limit order
With a limit order, the trader ensures that he does not exceed a maximum price when buying securities or a minimum price when selling. Although no completely fixed price can be set for the order, a price range can be set by means of the upper or lower limit. This makes the limit order the opposite of a market order, where purchases and sales are made at the current market price. The limit order is valid for a maximum of 90 days. The trader can choose the length of validity himself. If the desired price is not reached within the validity period, the order expires and is not executed.
The advantage of the limit order is that the buyer knows exactly what maximum amount he has to pay for the securities when placing the order. Even in the case of a sale, the trader knows the minimum amount he can expect to receive. However, the final amounts differ somewhat due to order fees and other costs.
Stop order
Experienced traders use stop orders to protect themselves against losses in securities trading. Another term for a stop order is stop market order. It is clear from this designation that a stop order changes into a market order as soon as the price of the traded security reaches the entered value, the stop price.
A stop order can be entered as:
- Stop Loss Order
- Stop buy order
