If a person doesn’t have any basic knowledge regarding the market mechanics and transaction process in the stock market, he is not considered to be a proper investor. You need to know all the process to place your order in the stock market so that your broker get the proper instruction to execute your order. If you understand the concept of the transaction, you will find it easy to handle. Placing orders by using different option is nothing but specify your order clearly. You will get various types of order for the transaction. Today we will cover “Different Types of Orders in the Stock Market” in simple terms.
Different Types of Orders in the Stock Market
Let’s start with the difference based on the product type, MIS/Intraday, and CNC/cash and carry.
Intraday trading refers to buying and selling stocks on the same day. You can trade from 9 am to 3.20 pm. If you are using intraday you will get leverage based on the stocks you are trading. It is applicable in both cash and future products. It gives margin benefits to traders.
This mainly deals with future and options trading. It can be cash or future based. In NRML you have to pay 10%-20% of margin of the contract value.
CNC/cash and carry
It is a delivery based trading. One of the biggest disadvantages of CNC is you will get little or no leverage. The margin is applicable for only cash or equity products. The order is best for the mid or long-term investor.
Now, we are going to discuss classifications of orders based on Price in the stock market, Market Order and Limit Order
The market order is nothing but an immediate trade order at the best available price. The specific order works based on the current market price. Order’s immediate execution is done here.
There are a few points one must remember. The current market price is not necessarily the price at which the MO will be executed. The current market price you have seen, that is the last traded price but your trade will be executed on the best match price of that particular day. Therefore, whenever you go for the market order, the price will be slightly different from the current market price.
In this type of order, you can set your preferable price limit. The term “limit order” itself defines the meaning of it. By placing this order investors can set the limit according to their wish. One of the main disadvantages of these types of order is these orders are only processed if the market reaches a specific price, otherwise, it remains open.
Most of the investors are familiar with the term “stop-loss”. There are two kinds of order based on stop loss, Stop loss Market order (SL-M) and Stop loss Limit order (SL).
SL Market order
You have to put a trigger price here in this category. Sometimes slippage happens in the highly volatile market that means after hitting trigger price, price value goes up to some extent within a short period of time.
SL Limit order
It consists of both trigger price and limits price. Your order will be active only after hitting the trigger price but the order will be executed when the limit price match. Sometimes, before the execution of order price goes below the limit price, in that case, your order will not execute.
Now, let’s discuss the classification based on the time duration, Good Till Day (GTD) and Immediate or Cancel (IOC).
GTT or Good till Triggered order is a kind of limit order but it is more advanced. The GTT order will be active until it reaches the set price. The validation of the GTT is 1 year. Once your set price is reached, the system automatically executes the order. The Good till Triggered is good at minimizing your losses or to book maximum profits when you are not actively tracking the markets.
Two Types of GTT Orders
GTT order can be a Buy GTT or a Sell GTT order. The description is as follows:
Buy GTT order
Buy GTT is basically used for creating triggers for buying delivery stocks. With this GTT buy order, once the trigger price is hit, a buy order with the previously set limit price is placed on the exchange.
Sell GTT order
Reversely, Sell GTT is used to exit current stock holdings. Here either just a target order or both the stop loss and the target were triggering until one will cancel the other (OCO).
Example of Broker that Provides GTT facility
Zerodha is such a broker that provides the GTT order facility. They are providing it for equity and futures, options segments. The order can be placed only in the market houres.
Good till day/GTD
It is valid for the specific date after that it will be canceled automatically by the system.
Immediate or Cancel/IOC
The order will execute immediately if execution not happens, it will be canceled automatically.
These are some of the basic classifications of orders in the stock market. Investors must be acquainted with these terms. In order to make an easier transaction one must know Different Types of Orders in the Stock Market.