Could somebody explain the utility of the various order types.
Limit Order - A limit order is an order to buy or sell a contract at a specified price. When
you are buying, you instruct your broker not to go higher than the specified price. And when
you are selling you instruct your broker not to sell below your specified price. The advantage
of placing a limit order is that you can place buy/sell order at the desired price. However
there is a chance that your order may not get filled.
Market Order – A market order is an order to buy or sell a contract at market prices. The
price is not specified at the time of placing the order. The buy market order gets executed
at the price at which the seller is ready to sell and the sell market order gets executed at the
price at which the buyer is ready to buy. The advantage of the Market Order is that the order
will definitely be executed all the prevailing market rate, however the trader might end up
paying slightly more or selling at slightly lower price.
Cover Order - A Cover Order the buy/sell order is always a Market Order and is
accompanied with a compulsory Stop Loss order, in a specified range. This Stop Loss
Order cannot be cancelled. Since the Stop Loss Order is being placed simultaneously, while
getting into the contract, the risk that is being taken automatically reduces. Because the risk
reduces, the margin requirement also automatically reduces. All cover orders (CO) will be
automatically squared off at 3:20 PM and hence this is a good tool for Intraday traders only.
Bracket Order - A type of order where you can enter a new position along with a target/exit
and a stoploss order. As soon as the main order is executed the system will place two more
orders (profit taking and stoploss). When one of the two orders (profit taking or stoploss)
gets executed, the other order will get cancelled automatically. When you place a bracket
order, you get an option to either place a fixed stoploss order, or also an ability to trail your
stoploss. What this would mean is that if the contract/stock moves in your direction by a
particular number of ticks, the stop loss will go up/down based on if you are long or short
automatically. A bracket order is a tool used by intraday traders only.
Stop Loss Orders – A stop loss order is buy/sell order placed by you to limit the losses
when you fear that the prices will start moving against you. So for example, if you have
bought a stock at Rs 100 and you want to limit the loss at 95, you can place an order in the
system to sell the stock as soon as the stock comes to 95. Such an order is called as a Stop
Loss, as you are placing it to stop a loss which could be more than what you are ready to
risk. The stop loss orders placed can be limit or market orders as follows:-
a)Stop Loss Limit – A stop loss Limit order, the trigger price and the limit price has be to
specified.Your trigger price should be below the limit price (for buying stop loss) and above
the limit price (for selling stop loss), otherwise the stop loss will get triggered immediately.
b)Stop Loss Market - In a stop loss market order only the trigger price has to be specified.
Once the trigger price is hit, the order becomes a market order and it will be executed. Stop
Loss market orders will always be filled and will definitely be executed.
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Say I have to place a buy order for tomorrow at a specified price.
Would it make any difference if I place a Limit AMO or a SL-M AMO order?
Is there any difference between the two in this case?
Thanks
SL and SL-M orders aren’t allowed for AMO’s, you can either place Market Order or Limit Order.
Say todays close is 100. I place a limit AMO for 102.
Even if the candle would have given a gap down opening otherwise, since there is a buy order @102, it would execute that first and then go down. Is this logic correct?
I hope you’re getting me…
Buy Limit Order above CMP gets executed at best available price in the market. You can read this for more info.
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