What are the Stock Order Types?

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Contributor, Benzinga
June 28, 2023

The stock market lets investors trade shares in thousands of companies. These assets can gain value, provide cash flow, and fortify retirement plans. The timing you buy and sell stocks impacts your total returns, but the type of order you initiate also plays a role. Investors can choose from several stock order types, and knowing what they are can refine your strategy.

What is a Stock Order?

A stock order is when an investor buys or sells a stock in the open market. These orders take place within seconds after the conditions have been met. Some stock orders take place the moment you initiate them, while the stock’s price must reach a certain point for the order to take place.

Why Do Stock Order Types Matter?

Stock order types impact your cost basis, returns and when you enter and exit positions. The type of order you place can prolong the amount of time it takes to buy or sell shares as you wait for them to hit the desired price. You can save money and increase your returns by placing the right type of stock order.

9 Stock Market Order Types

Stock investors can choose from several order types. These are the nine stock market order types that you should see in your brokerage firm’s offerings.

1. Market Order

Market orders are the most standard stock orders. These buy orders or sell orders get executed the moment you place them. If a stock is currently valued at $100 per share, your market order will go through at $100 per share. If the stock’s price changes within the few seconds it takes to complete the order, you will receive shares at the current price.

2. Limit Order

Limit orders allow you to set specific entry and exit points. These orders are best for investors who believe a stock may present a more attractive entry or exit price by the end of the day. Assume a stock trades at $50 per share. A trader looking to buy shares may set a limit order that goes through at $49.50 per share. A trader looking to sell shares may set a limit order of $50.75.

In one scenario, the investor aims to save $0.50 per share, while in another scenario, the investor wants to earn an additional $0.75 per share. The limit order only goes through if the stock reaches the desired entry or exit price. If the stock does not reach the price point, the limit order remains unfilled. 

3. Stop Loss Order (SL Order)

Stop-loss orders let you limit your losses from a stock based on your risk tolerance. These orders automatically go through if the stock reaches the designated exit price. If you have a stock worth $30 per share, and you do not want your hold onto shares if they fall below $29 per share, you can set up a stop-loss order that goes through when the stock reaches the price point. With this arrangement, you don’t have to closely monitor your portfolio and manually sell when the stock reaches the exit price. Stock market participants do not see stop-loss orders, while it is possible for them to see limit orders.

4. Trailing Stop Loss Order

A trailing stop-loss order is similar to a regular stop-loss order. However, instead of deciding on an exit price, you decide on the maximum dollar or percentage loss that triggers the order. If you have a stock valued at $50 per share, you can set a trailing stop loss order that limits your losses to 5%, or $2.50 per share. You can put either of those amounts into the trailing stop loss order instead of specifying $47.50 per share.

5. Cover Order (CO)

A cover order involves buying or selling shares and then placing a corresponding stop-loss order. This hedge limits your losses and lets you benefit from upward movement in the stock price. You can also use a cover order for a short position where you would want the stock’s price to continue falling. However, a stop loss will limit how much you lose if the stock’s price increases.

6. After-Market Order (AMO)

After-market orders take place outside of market hours. You can place these orders before 9:30 a.m. Eastern or after 4 p.m. Eastern. Some of these orders take place within pre-market and after-market hours, while others get executed the moment the stock market opens. If you cannot invest in stocks during market hours, an after-market order can help you make investments.

7. Good-Til-Canceled Order (GTC)

Good-til-canceled orders stay open until they go through. You can set a desirable entry or exit price and wait for the stock to reach that price point. Most brokerage firms will cancel these orders if they remain unfilled after 90 days.

8. Immediate or Canceled Order (IOC)

An Immediate or Canceled Order must go through right away or else get canceled. This order can help traders who only want to buy shares at their desired price. Some market orders get completed partially, which means some shares may get purchased at a higher price than intended. Immediate or canceled orders remove this concern.

9. Bracket Order (BO)

A bracket order involves two stock orders that let an investor cap their gains and limit their losses. Some investors use this order to guarantee some gains and open the door for additional profits. The setup for a bracket order involves a sell limit order and a stop-loss order. The limit order establishes a higher price that will trigger an exit and higher profits. The stop-loss order is placed above the cost basis for the position, which guarantees a profit. You can only set a stop-loss order above your cost basis if the stock has appreciated since you purchased shares.

Complete Stock Market Orders with Benzinga's Top Brokerages

Brokerage firms can help you complete stock market orders, increase your returns and plan for retirement. These are some of the best stock market brokerages to consider.

Using Stock Orders to Grow Your Portfolio

Stock orders give you more flexibility with how you enter and exit trades. The different types of stock orders can help you save money and secure higher gains. Investors should assess each stock order type and their financial goals to determine which orders are optimal for their portfolios.

Frequently Asked Questions 

Q

What is the best order type in the stock market?

A

The best order type in the stock market depends on what you want as an investor. Some orders take place immediately, while others let you minimize losses and secure gains.

Q

What are the 4 main types of stock orders?

A

Market orders, limit orders, stop-loss orders and after-market orders are the four main types of stock orders.

Q

What is a buy order vs. sell order?

A

A buy order occurs when an investor buys shares, while a sell order occurs when an investor wants to sell shares.