Four orders can be placed with a brokerage firm for an investor or agent to purchase or sell securities. These include:

Market Order

A market order is an active trade request from a client to buy/sell at the best available price. This order is typically used when speed and certainty are a priority. Market orders are easy to place but always get you the desired price.

This is because stock market orders are filled with “dynamic execution, ” meaning that the broker will try to match your purchase price with another trader who has already placed his/her/its trade.

If the price constantly changes, you can run into a situation where your order goes unfilled if no other party has placed a matching order(s).

Market orders are not guaranteed a specific price, resulting in a significant cost difference from what you expected. This is due to the time of entry, the volume at which it was traded, and competitive orders that engage with yours before your order gets filled.

In highly volatile markets or periods of low liquidity, this risk is exacerbated, as many investors will attempt to execute their trades simultaneously, leading to an increase in the spread between the bid and ask.

Investors requiring certainty may achieve a limit order instead of a market order.

Limit Orders

A limit order is an active trade request from a client that executes only when the market reaches a user-set price. It’s essential for ensuring both certainties of execution and cost efficiency because it reduces your exposure in fast-moving markets.

A limit order can help investors enter or exit positions at a specific price level without worrying about receiving unfavorable pricing or being filled in the spread.

A limit order is to buy/sell at a predefined price, but only when certain conditions are met. When you buy shares with a limit order, your execution will happen if and when the security reaches that price.

There is no assurance that this will happen because there may be many outstanding trades ahead of yours with higher priorities (i.e., they were placed before yours) to get executed first.

The same problem exists when selling; your trade may not be performed if not enough buyers are willing to pay the price you want for your shares.

Another problem with limit orders is that you don’t know what price your executor will get; for example, if the market moves very fast, it could be higher or lower than expected.

Stop Order

A stop order is to sell a security when the price reaches a particular level, or a buy order is to be executed only when the market price falls to a specified level.

So, if you have sold short and want to protect your unrealized gain, you can use your broker’s “stop-loss” order.

The stop-loss order does not guarantee you will exit at the exact price set in the stop-order, but it should provide some protection from downside risk.

All stop orders become limit orders as soon as they are entered into the trading system—so a sudden move against your position may affect how close your sale gets executed.

Conditional Orders

This type of order is used when the investor wishes to use different order types.

The conditional order combines a stop or limit order with a time-in-force designation, such as a good-until date or good-for-the-day.

Extra orders to know about are as follows:

Good-til-canceled (GTC) Orders

A GTC order is an active trade request from a client that only executes when the market reaches a user-set price.

This type of order can help an investor enter or exit positions at a specific price level without worrying about receiving unfavorable pricing or being filled in the spread.

Market conditions can cause your order to remain open even after you have decided to cancel it—so if there’s a sudden move against your position, that may affect how close your sale gets to the price you wanted.

All or None (AON) Orders

An AON order is an active trade request from a client that only executes when the market reaches a user-set price and all shares can be filled.

The order will not be completed if only part of it can be served. It helps ensure certainty of execution and has no additional cost beyond what you would otherwise pay to place a regular limit order.

Link to Saxo Bank for more information.